Bookblogging: the reanimation of trickle down

The deadline for the manuscript of Zombie Economics (last complete draft here) is only a few weeks away, and the zombies are popping up faster than I can knock them down. I’m adding a section on reanimated zombies to each chapter. Over the fold is the social mobility defense of trickle down economics, as animated by Thomas Sowell. There’s still time for me to benefit from your comments.

A good zombie movie needs a sequel, and so, it is almost inevitable that some zombies will survive to carry on the tradition. The best candidate for zombie immortality is probably the trickle-down hypothesis. As we’ve seen it can be traced back, under that name, at least to the early 20th century. But as long as there have been rich and poor people, or powerful and powerless people, there has been a market for advocates to explain that it’s better for everyone if things stay that way.

The hymn ‘All things bright and beautiful’, one of the favorites in the hymnbook of my youth is, for the most part a paean to the beauties of creation. But, the real message comes in the verse ‘The rich man in his castle, the poor man at his gate, God made them high and lowly, and ordered their estate’. And the same message is contained in Aesop’s fable, about the tail of the snake that foolishly rebelled against its natural master, the head, with dire consequences.

With such a long pedigree, trickle down economics is unlikely to be killed. Still, given the overwhelming evidence that social mobility in the US is both low by the standards of developed countries and decreasing steadily, the task of reanimating this zombie idea looks like a difficult one. But Thomas Sowell of the Hoover Institute is up to the job.

In his latest book, Intellectuals and Society, Sowell excoriates liberals for their misunderstanding of economics and sweeps aside concerns about declining social mobility with the assertion that, ‘neighborhoods may remain the home of poor people for generations, no matter how many people from the neighborhoods move out to a better life as they move up from one income bracket to another.’ He immediately contradicts himself with the observation that Harlem was formerly a middle-class Jewish community, and appears unaware of the recent (re)gentrification process in which blacks have again become a minority group in greater Harlem. http://www.nytimes.com/2010/01/06/nyregion/06harlem.html

This insouciant attitude to evidence is unsurprising. In earlier writing on the topic, Sowell made the observation that ‘ If mobility is defined as being free to move, then we can all have the same mobility, even if some end up moving faster than others and some of the others do not move at all. ’

In fact, on Sowell’s account, the US would remain the world’s most socially mobile society even if everyone ended up in the exact same social position as their parents.

As Sowell astutely observes ‘A car capable of going 100 miles an hour can sit in a garage all year long without moving. But that does not mean that it has no mobility.’ If the poor don’t succeed, he says, its because they are not willing to make the necessary efforts and sacrificies

Translating to the real world question, if we observe one set of children born into a wealthy family, with parents willing and able to provide high-quality schooling and ‘legacy’ admission to the Ivy League universities they attended, and another whose parents struggled to put food on the table, we should not be concerned that members of the first group almost invariably do better. After all, some people from very disadvantaged backgrounds achieve success. and there was no law preventing the rest from doing so.

Clearly, an idea so appealing to people who can afford to reward its promulgators is unlikely to be killed by mere evidence of its falsehood. Perhaps if the political left is willing to return to class politics (something the rightwing advocates of trickle down have never abandoned) it might, at least find a way to drive this zombie idea out of the assumed knowledge of political debate.

34 thoughts on “Bookblogging: the reanimation of trickle down

  1. I don’t mean to be unfriendly, but your emotional devotion to whatever you regard as “capitalism” is so deep you’re obviously not going to be responsive to any alternative that I or anybody could possibly propose.

  2. Terje: ” I don’t think the ‘shielding the children of the affluent from competition in life’ argument carries much weight…”
    This pearl nonchalantly dropped, has me puzzled. If it (“shielding”) doesn’t work, why do the parents of rich kids keep turning up in their beamers and fourwheel drives outside of expensive private schools (usually trying to run over any bystander crossing the road, in the process!)?
    Alex says the rest.
    As mentioned above, of course a kid with the advantages of life has a better chance of material, if not emotional, success.
    And we know that destroying state infrastructure in the interests of
    “small” (eg ineffectual) government further widens the divide with the inclusion of two “bads”: removal of alternatives for the less well off so that only the offspring of the well-off get access to concerted education and further tax cuts for the rich to waste consolidating their power, as facilities for the poor are instead postponed.
    If rich kids “fail”, it’s more likely because of the warped values exemplified by their grasping parents: victimhood/entitlement, “world owes me a living”and the zealously prosecuted continuing war against the backsliding”undeserving” poor.

  3. Paul, people want their kids to get a good education so they can do well in life. They send them to good schools because they want their kids to face some competitive pressure (also for other reasons) not because they want to sheild their kids from competition. Ensuring that poor kids get a bad education does not provide greater opportunities for rich kids. Andy implied that that the rich of America are actively trying to ensure that the poor get a bad education. This is the idea that I reject.

    Government in Australia can get a lot smaller without impacting on transfers from rich to poor simply by focusing on churn. And it can certainly be done in a manner that would improve the lot of those who occupy the bottom quartiles.

  4. John Street :
    What I am somewhat confused about is what this all means for what government or other social groups should do (rather than what they should not).

    An important and useful question. I suppose it’s about thinking about the barriers to social mobility and how those barriers can be removed, or their adverse consequences lessened for those in poverty or on low incomes. In no priority order my suggestions would be:

    High quality social services including protection of children. Children from poor families are over-represented in abuse and neglect stats. So, increased resources to helping those children and families, including direct intervention (including removal) when children are in abusive households.

    High quality and fee-free (for those on low incomes) child care. Related to above, it gives kids a good social environment in the important formative years, gives them nutritious food for the day and gives their parents an opportunity to earn higher income from full or part-time work.

    Fee-free and high quality education. This includes additional money for high quality teachers in disadvantaged areas, strong management of teacher performance, and standardised tests to determine those schools that need additional help. Transfer funding from private schools to disadvantaged public schools to fund.

    Income that allows savings. So people on low incomes can save, reduce the marginal tax rates for poor and low income easrners. Raise rates elsewhere on the income scales, and remove industry subsidies etc, to fund this.

    Competitive credit markets that lend to people with a low asset base to allow them to start a business. So those on low incomes who want to start a business have access to credit.

    Competitive and low cost premiums for insurance, to allow people to insure against catastrophic events and therefore not be bounced back to poverty when they experience bad random events.

    Fee-free and universal health and dental care, for the same reason as above.

    That would be a start.

  5. @boconnor
    Thank you.

    I interpret that as meaning that the most efficient (effective?) way of helping the poor is to provide them with opportunities. So the idea is to raise, rather than lower, taxes on the rich and to spend the tax income on education, insurance and health? (And what is the optimum level of tax?)

    Is direct income redistribution through taxes from high income earners to low income earners or to those who earn no income at all not regarded as useful? What about people with disabilities of a kind that prevent them from fully partaking of these opportunities?

  6. John Street :
    @boconnor
    Thank you.

    Your welcome.

    (And what is the optimum level of tax?)

    Ah, the $65 billion question. The simplistic answer is: determine your social policy goals, calculate their cost and then raise revenue to cover it.

    But, of course it’s much trickier than that. For instance consider child protection services. The marginal cost of protecting the next vulnerable child rises inexorably once you have protected the majority of the vulnerable and reachable children. It’s not at all clear when to stop investing in additional child protection services (i.e. when the cost becomes too high). That’s probably the reason budgets are currently allocated using a percentage increase or decrease on the previous year, rather than starting from scratch with clear objectives about how many and in what situations children are to be protected. The latter is much harder to do than the former. It’s also scarier for politicians because it forces them to indicate who will not be covered by their social policy.

    I suppose it’s also not just about marginal tax rates. It’s also about what gets subsidised. Lots of money could be liberated from the hands of industry and redistributed to those in need.

    Is direct income redistribution through taxes from high income earners to low income earners or to those who earn no income at all not regarded as useful?

    Yes, I think it’s useful.

    What about people with disabilities of a kind that prevent them from fully partaking of these opportunities?

    I suppose it would be a mixture of (a) additional direct income transfers to account for the increased costs faced by those with disabilities, and (b) enhanced social services (eg face-to-face assistance) to help those with disabilities take advantage of any opportunities that may arise.

  7. In fact, on Sowell’s account, the US would remain the world’s most socially mobile society even if everyone ended up in the exact same social position as their parents.

    A lucid logical deconstruction of the argument, Prof Q. It could be fun to go further, since the Sowell account equates ‘actually happening’ with ‘not prohibited by law’. It’s also a corollary of Anatole France’s line that

    The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.

  8. “Ensuring that poor kids get a bad education does not provide greater opportunities for rich kids.”

    Sure it does. Would you rather be one of 30 qualified applicants for a job, or one of 3 because the other 27 didn’t get a sufficient quality education to render them qualified? Clearly, the latter is a greater opportunity.

    Furthermore, the rich don’t have to actively sabotage education for the poor in the sense of firebombing schools or something like that; they just have to prevent their own wealth from being taxed to fund it. The poor, by definition, can’t fund much of anything, so if the education of poor children isn’t funded adequately by taxes it won’t be funded adequately at all. (And isn’t, in the present-day U.S.)

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