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> there is no empirical evidence for trickle down economy I usually avoid responding to remarks like this because they risk forays into politics, which I avoid

by ryao 1y ago

> there is no empirical evidence for trickle down economy I usually avoid responding to remarks like this because they risk forays into politics, which I avoid, but the temptation to ask was too great here. What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? The first ones had outrageous prices that only the exorbitantly wealthy could afford. Now almost everyone in the US has them. They seem to have trickled down to me.

neom 1y ago
OP is talking about this: https://www.investopedia.com/terms/t/trickledowntheory.asp https://www.investopedia.com/terms/t/trickledowntheory.asp You're talking about this: https://ideas.repec.org/p/wrk/warwec/270.html https://ideas.repec.org/p/wrk/warwec/270.html :)
- ryao 1y ago
  Are those entirely separate things? Hardware development is expensive. Having the money to develop these things and iterate on them enabled them to begin as luxuries for wealthy people and evolve into things the rest of us can have.
  - neom 1y ago
    You're right to a degree in that they are somewhat coupled systems, the real economy operates in a gaussian of many economic theories, hence it's hard to model and all that. Never the less in traditional economic theory they are analyzed separately. The connection exists but it shouldn't be seen as validating trickle down as economic policy.
  - conductr 1y ago
    I would argue that technology diffusion would occur even without trickle down economics/tax policies. Even if they were taxed more heavily, there would still be people wealthy enough to buy the v1.0 flat screen, computer, DVD player, etc because wealth is still unevenly distributed and there are still some richer people in the population. Trickle down economics is supposed to make poorer people more wealthy. Not suppress their wage growth while offering a greater selection of affordable gadgets.
    - ryao 1y ago
      Would it have happened to the same extent? Also, describing these things as gadgets understates the extent to which they are beneficial, given that a gadget refers to a novelty by definition: https://www.merriam-webster.com/dictionary/gadget https://www.merriam-webster.com/dictionary/gadget Among the many things that have become affordable for every day people because money had been present to fund the R&D are air conditioners, refrigerators, microwave ovens, dish washers, washing machines, clothes dryers, etcetera. When I was born in the 80s, my parents had only a refrigerator (and maybe a microwave oven). They could not afford more. Now they have all of these things.
      - conductr 1y ago
        I could ask the same of you. Do these things only exist because of trickle down? Do you have proof they wouldn’t have been invented and commercialized without it? I don’t expect either of us to be able the answer the questions posed. Nobody in the 80s was asking for any of these inventions. People were living their lives happily ignorant to a better future. For that reason, most of these things do amount to just gadgets. They have shaped our lives in a dramatic way and had huge commercial success by solving huge problems or increasing conveniences, but they are still nonessential. That’s the way I’m using the term, don’t really care what Webster has to say about it tbh as I’m perhaps being dramatic precisely to highlight this point. The continuation of R&D isn’t even a trickle down policy. If you’re a big manufacturer of CRT televisions, it’s in your interest to continue inventing better technology in that space just to remain competitive. If you’re really good at it, there’s a good chance you can steal market share. It’s good old fashioned business as usual in a competitive industry. I don’t see how they relate to one another. Not to mention that many things are invented in a garage somewhere and capital is infused later. Would this only happen if the rich uncles of the world benefited from economic policies aimed at making them rich? I think it would still find a way in most cases, good ideas typically always find a way. I don’t think a majority of gadgets can be linked to something like “brought to you by trickle down economics”.
  - wat10000 1y ago
    “Trickle down” is about making the masses wealthier in general, not just making shiny new toys for them. It’s easy for the HN crowd to think that a cool new computer equates to wealth, but that’s not what most people consider it to be. Does cutting taxes for the rich allow the common person to buy better food, pay their mortgage off earlier, send their kids to better schools? That’s the question you need to ask about “trickle down,” not how big our TVs would be.
    - ryao 1y ago
      If it results in businesses like Aldi, then yes. Aldi not only pays above market rates, but charges below market prices for quality food. Honestly, I have to say that I am relatively happy with the things that I have these days because of obscenely wealthy people’s investments. I have a heat pump air conditioner that would have been unthinkable when I was a child. I have food from Aldi and Lidl, whose prices relative to the competition also would have been unthinkable when I was a child. I have an electric car and solar panels, which were in the realm of fantasy when I was a child. Solar panels and electric cars existed, but solar panels were obscenely expensive and electric cars were considered a joke when I was young. I have a gigabit fiber internet connection at $64.99 per month, such internet connections were only available to the obscenely rich when I was a child. I am not sure if I would have any of these things if the money had not been there to fund them. I really do feel like things have trickled down to me.
      - wat10000 1y ago
        What’s the connection between wealthy people getting wealthier and businesses like Aldi? I like electric cars and solar panels and gigabit fiber as much as the next person, but they aren’t wealth.
        ryao 1y ago
        Aldi is privately owned: https://en.wikipedia.org/wiki/Aldi https://en.wikipedia.org/wiki/Aldi If you shop there, you are enriching its owners. That is not a bad thing. The more money they have, the better they make things for people, so it is a win-win. Note that Aldi is technically two companies since the family that founded it had some internal disagreement and split the company into two, but they are both privately owned. That said, if wealthy people had not made investments, I would not have an electric car, solar panels or gigabit fiber. The solar panels also improve property values, so it very much is a form of wealth, although not a liquid one. Electric cars similarly are things that you can sell (although they are depreciating assets), so saying that they are not wealth is not quite correct. The internet connection is not wealth in a traditional sense, but it enables me to work remotely, so it more than pays for itself.
zzrrt 1y ago
Trickle-down economics isn’t about the price of goods coming down over time. I’m not an economist so I’ll leave it up to https://en.m.wikipedia.org/wiki/Trickle-down_economics https://en.m.wikipedia.org/wiki/Trickle-down_economics to explain more.
- KingOfCoders 1y ago
  Thanks, TLDR doesn't work says science according to the Wikipedia article.
  - ryao 1y ago
    A sibling comment linked investopedia.com, which had a very different take on the matter. The TLDR there was: > The trickle-down theory includes commonly debated policies associated with supply-side economics.
usrbinbash 1y ago
> What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? Products people buy with the money they earn. Not things that fall down from the tables of the ultra rich. Their affordability comes from the economies of scale. If I can sell 100000 units of something as opposed to 100 units, the cost-per-unit goes down. Again, nothing to do with anything "trickling down".
- ryao 1y ago
  R&D was required not only to create initial versions, but also to increase scale. If the money had not been there for all of that, how would the affordable versions exist today?
  - deleted 1y ago
    [deleted]
  - blensor 1y ago
    That is literally what patents were invented for. Give the entity that puts the resources into creating something new some protection to be able to recoup that
    - ryao 1y ago
      That does not answer the question of how the affordable versions would exist if the money to create them was not there in the first place. You cannot recoup what never existed. Also, not all patents are monetizable.
      - blensor 1y ago
        I don't understand your point then. The original product exists because someone used their own or their investors money and made a bet on an idea. Then they hope they can sell it at a profit. Products becoming cheaper is a result of the processes getting more optimized ( on the production side and the supply side ) which is a function of the desire to increase the profit on a product. Without any other player in the market this means the profit a company makes on that product increases over time. With other players in that market that underprice your product it means that you have to reinvest parts of your profit into making the product cheaper ( or better ) for the consumer.
PicassoCTs 1y ago
The end result of state investment into large research projects during the cold war?
blensor 1y ago
I'd say prices of products come down due to competition, not due to the companies getting more money outside of the regular supply/demand relationship. Let's assume you have a monopoly on something with a guarantee that no one else can sell the same product in your market. Then there is no direct incentive to make the product cheaper, even if you can produce it for cheaper. Adding more money on top of it that is supposed to trickle down in some way will not make that product cheaper, unless there is an incentive for that company to do so. The real world is of course more complicated, let's say you have two companies that get the incentives and one of them is using it to make the product cheaper, then that will "trickle down" as a price decrease because the other company need to follow suit to stay competitive. But this again is driven by the market and not the incentives and would have happened without them just as well.
- ryao 1y ago
  You seem to describe commodities, rather than new technologies that are not commodities. New technologies start so far out on the supply demand curve that an order of magnitude decrease in price can expand the market by orders of magnitude. The first cellular phone in modern currency cost something like $15,000. At that price, the market for it would be orders of magnitude below the present cellular phone market size. Lower the price 1 to 2 orders of magnitude and we have the present cellular phone market, which is so much larger than what it would have been with the cellular phone at $15,000. Interestingly, the cellular phone market also seems to be in a period where competition is driving prices upward through market segmentation. This is the opposite of what you described competition as doing. Your remark that the real world is more complicated could not be more true.
  - blensor 1y ago
    Prices going up is only true if you also let the specs go up If you fix the specs and progress time then the prices go down considerably Take the first Iphone which was $499 ( $776.29 if adjusted for inflation ) and try to find a currently built phone with similar specs. I couldn't find any that go down that far but the cheapest one I could find was the ZTE Blade L9 ( which still has higher specs overall ) then we are looking at over 90% price reduction
cheema33 1y ago
My understanding of trickle down economy, could be incorrect, has been that it is a policy that advocates govt. giving money to the rich. Through tax breaks and other means. The idea being that the rich would then spend that money in ways that would allow the benefits to trickle down to the poor.
- squidbeak 1y ago
  This is correct. The idea is that money spent by the wealthy enjoying themselves or making themselves wealthier through investments eventually reaches the poorest - in some form. Quite why we've persuaded ourselves we need to do this through a remote & deaf middleman is anyone's guess, when governments we elect could just direct money through policies we can all argue about and nudge in our own small ways.
the_other 1y ago
And yet the wealth gap has only widened over the period between their invention and distribution. I ask hyperbolically: are they economic enablers or financial traps? (My hunch is that fridges are net-enablers, but TVs are net-traps. I say this as someone with a TV habit I would like to kick.)
Macha 1y ago
Computers of course were invented by a state controlled war economy, pretty much the opposite of trickle down. Permeation of technology due to early adopters paying high costs leading to lower costs is not what trickle down generally means. Being an early adopter of cellphones, AC, flat screen TVs or computers required the wealth level of your average accountant of that era - it didn't require being a millionaire.
guywithahat 1y ago
Tickle down is a bit of a nonsensical term, it's called supply side economics and it's a well studied, proven way to strengthen the economy. It's how Reagan ended stagflation, and is generally one of the first things governments turn to when the economy is struggling

by ryao 1y ago

neom 1y ago

OP is talking about this: https://www.investopedia.com/terms/t/trickledowntheory.asp https://www.investopedia.com/terms/t/trickledowntheory.asp You're talking about this: https://ideas.repec.org/p/wrk/warwec/270.html https://ideas.repec.org/p/wrk/warwec/270.html :)

ryao 1y ago
Are those entirely separate things? Hardware development is expensive. Having the money to develop these things and iterate on them enabled them to begin as luxuries for wealthy people and evolve into things the rest of us can have.
- neom 1y ago
  You're right to a degree in that they are somewhat coupled systems, the real economy operates in a gaussian of many economic theories, hence it's hard to model and all that. Never the less in traditional economic theory they are analyzed separately. The connection exists but it shouldn't be seen as validating trickle down as economic policy.
- conductr 1y ago
  I would argue that technology diffusion would occur even without trickle down economics/tax policies. Even if they were taxed more heavily, there would still be people wealthy enough to buy the v1.0 flat screen, computer, DVD player, etc because wealth is still unevenly distributed and there are still some richer people in the population. Trickle down economics is supposed to make poorer people more wealthy. Not suppress their wage growth while offering a greater selection of affordable gadgets.
  - ryao 1y ago
    Would it have happened to the same extent? Also, describing these things as gadgets understates the extent to which they are beneficial, given that a gadget refers to a novelty by definition: https://www.merriam-webster.com/dictionary/gadget https://www.merriam-webster.com/dictionary/gadget Among the many things that have become affordable for every day people because money had been present to fund the R&D are air conditioners, refrigerators, microwave ovens, dish washers, washing machines, clothes dryers, etcetera. When I was born in the 80s, my parents had only a refrigerator (and maybe a microwave oven). They could not afford more. Now they have all of these things.
    - conductr 1y ago
      I could ask the same of you. Do these things only exist because of trickle down? Do you have proof they wouldn’t have been invented and commercialized without it? I don’t expect either of us to be able the answer the questions posed. Nobody in the 80s was asking for any of these inventions. People were living their lives happily ignorant to a better future. For that reason, most of these things do amount to just gadgets. They have shaped our lives in a dramatic way and had huge commercial success by solving huge problems or increasing conveniences, but they are still nonessential. That’s the way I’m using the term, don’t really care what Webster has to say about it tbh as I’m perhaps being dramatic precisely to highlight this point. The continuation of R&D isn’t even a trickle down policy. If you’re a big manufacturer of CRT televisions, it’s in your interest to continue inventing better technology in that space just to remain competitive. If you’re really good at it, there’s a good chance you can steal market share. It’s good old fashioned business as usual in a competitive industry. I don’t see how they relate to one another. Not to mention that many things are invented in a garage somewhere and capital is infused later. Would this only happen if the rich uncles of the world benefited from economic policies aimed at making them rich? I think it would still find a way in most cases, good ideas typically always find a way. I don’t think a majority of gadgets can be linked to something like “brought to you by trickle down economics”.
- wat10000 1y ago
  “Trickle down” is about making the masses wealthier in general, not just making shiny new toys for them. It’s easy for the HN crowd to think that a cool new computer equates to wealth, but that’s not what most people consider it to be. Does cutting taxes for the rich allow the common person to buy better food, pay their mortgage off earlier, send their kids to better schools? That’s the question you need to ask about “trickle down,” not how big our TVs would be.
  - ryao 1y ago
    If it results in businesses like Aldi, then yes. Aldi not only pays above market rates, but charges below market prices for quality food. Honestly, I have to say that I am relatively happy with the things that I have these days because of obscenely wealthy people’s investments. I have a heat pump air conditioner that would have been unthinkable when I was a child. I have food from Aldi and Lidl, whose prices relative to the competition also would have been unthinkable when I was a child. I have an electric car and solar panels, which were in the realm of fantasy when I was a child. Solar panels and electric cars existed, but solar panels were obscenely expensive and electric cars were considered a joke when I was young. I have a gigabit fiber internet connection at $64.99 per month, such internet connections were only available to the obscenely rich when I was a child. I am not sure if I would have any of these things if the money had not been there to fund them. I really do feel like things have trickled down to me.
    - wat10000 1y ago
      What’s the connection between wealthy people getting wealthier and businesses like Aldi? I like electric cars and solar panels and gigabit fiber as much as the next person, but they aren’t wealth.
      - ryao 1y ago
        Aldi is privately owned: https://en.wikipedia.org/wiki/Aldi https://en.wikipedia.org/wiki/Aldi If you shop there, you are enriching its owners. That is not a bad thing. The more money they have, the better they make things for people, so it is a win-win. Note that Aldi is technically two companies since the family that founded it had some internal disagreement and split the company into two, but they are both privately owned. That said, if wealthy people had not made investments, I would not have an electric car, solar panels or gigabit fiber. The solar panels also improve property values, so it very much is a form of wealth, although not a liquid one. Electric cars similarly are things that you can sell (although they are depreciating assets), so saying that they are not wealth is not quite correct. The internet connection is not wealth in a traditional sense, but it enables me to work remotely, so it more than pays for itself.

zzrrt 1y ago

Trickle-down economics isn’t about the price of goods coming down over time. I’m not an economist so I’ll leave it up to https://en.m.wikipedia.org/wiki/Trickle-down_economics https://en.m.wikipedia.org/wiki/Trickle-down_economics to explain more.

KingOfCoders 1y ago
Thanks, TLDR doesn't work says science according to the Wikipedia article.
- ryao 1y ago
  A sibling comment linked investopedia.com, which had a very different take on the matter. The TLDR there was: > The trickle-down theory includes commonly debated policies associated with supply-side economics.

usrbinbash 1y ago

> What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? Products people buy with the money they earn. Not things that fall down from the tables of the ultra rich. Their affordability comes from the economies of scale. If I can sell 100000 units of something as opposed to 100 units, the cost-per-unit goes down. Again, nothing to do with anything "trickling down".

ryao 1y ago
R&D was required not only to create initial versions, but also to increase scale. If the money had not been there for all of that, how would the affordable versions exist today?
- deleted 1y ago
  [deleted]
- blensor 1y ago
  That is literally what patents were invented for. Give the entity that puts the resources into creating something new some protection to be able to recoup that
  - ryao 1y ago
    That does not answer the question of how the affordable versions would exist if the money to create them was not there in the first place. You cannot recoup what never existed. Also, not all patents are monetizable.
    - blensor 1y ago
      I don't understand your point then. The original product exists because someone used their own or their investors money and made a bet on an idea. Then they hope they can sell it at a profit. Products becoming cheaper is a result of the processes getting more optimized ( on the production side and the supply side ) which is a function of the desire to increase the profit on a product. Without any other player in the market this means the profit a company makes on that product increases over time. With other players in that market that underprice your product it means that you have to reinvest parts of your profit into making the product cheaper ( or better ) for the consumer.

PicassoCTs 1y ago

The end result of state investment into large research projects during the cold war?

blensor 1y ago

I'd say prices of products come down due to competition, not due to the companies getting more money outside of the regular supply/demand relationship. Let's assume you have a monopoly on something with a guarantee that no one else can sell the same product in your market. Then there is no direct incentive to make the product cheaper, even if you can produce it for cheaper. Adding more money on top of it that is supposed to trickle down in some way will not make that product cheaper, unless there is an incentive for that company to do so. The real world is of course more complicated, let's say you have two companies that get the incentives and one of them is using it to make the product cheaper, then that will "trickle down" as a price decrease because the other company need to follow suit to stay competitive. But this again is driven by the market and not the incentives and would have happened without them just as well.

ryao 1y ago
You seem to describe commodities, rather than new technologies that are not commodities. New technologies start so far out on the supply demand curve that an order of magnitude decrease in price can expand the market by orders of magnitude. The first cellular phone in modern currency cost something like $15,000. At that price, the market for it would be orders of magnitude below the present cellular phone market size. Lower the price 1 to 2 orders of magnitude and we have the present cellular phone market, which is so much larger than what it would have been with the cellular phone at $15,000. Interestingly, the cellular phone market also seems to be in a period where competition is driving prices upward through market segmentation. This is the opposite of what you described competition as doing. Your remark that the real world is more complicated could not be more true.
- blensor 1y ago
  Prices going up is only true if you also let the specs go up If you fix the specs and progress time then the prices go down considerably Take the first Iphone which was $499 ( $776.29 if adjusted for inflation ) and try to find a currently built phone with similar specs. I couldn't find any that go down that far but the cheapest one I could find was the ZTE Blade L9 ( which still has higher specs overall ) then we are looking at over 90% price reduction

cheema33 1y ago

My understanding of trickle down economy, could be incorrect, has been that it is a policy that advocates govt. giving money to the rich. Through tax breaks and other means. The idea being that the rich would then spend that money in ways that would allow the benefits to trickle down to the poor.

squidbeak 1y ago
This is correct. The idea is that money spent by the wealthy enjoying themselves or making themselves wealthier through investments eventually reaches the poorest - in some form. Quite why we've persuaded ourselves we need to do this through a remote & deaf middleman is anyone's guess, when governments we elect could just direct money through policies we can all argue about and nudge in our own small ways.

the_other 1y ago

And yet the wealth gap has only widened over the period between their invention and distribution. I ask hyperbolically: are they economic enablers or financial traps? (My hunch is that fridges are net-enablers, but TVs are net-traps. I say this as someone with a TV habit I would like to kick.)

Macha 1y ago

Computers of course were invented by a state controlled war economy, pretty much the opposite of trickle down. Permeation of technology due to early adopters paying high costs leading to lower costs is not what trickle down generally means. Being an early adopter of cellphones, AC, flat screen TVs or computers required the wealth level of your average accountant of that era - it didn't require being a millionaire.

guywithahat 1y ago

Tickle down is a bit of a nonsensical term, it's called supply side economics and it's a well studied, proven way to strengthen the economy. It's how Reagan ended stagflation, and is generally one of the first things governments turn to when the economy is struggling