Sunday, June 26, 2011

Trickle-Down Ignorance

One need not watch An Inconvenient Tax (a film explores the history of the income tax in the United States) in order to be convinced that the current system of income taxation is an utter and complete disaster.

An issue that this documentary did not discuss is the fallacy of "trickle down economics", and the fact that those trying to espouse (or foolishly attack what is actually a fallacious argument anyway) the "trickle down" theory are misguided.  While our politicians are concerned with only rhetoric and short term political gains, Thomas Sowell's columns over the years provide invaluable insight.  Sowell truly is an intellectual heavyweight with the ability to break down the complex into layman's terms.  (His columns can be found here, here, and here.)  One of his best - Trickle-Down Ignorance - is pasted below from Capitalism Magazine:

As much as I enjoy most of the messages from readers, there is no way that I can answer more than a small fraction of them. The messages I don't reply to at all are those from obviously ignorant people who offer insults instead of arguments. However, a recent column has brought forth more than the usual number of uninformed denunciations, so it may be useful to other readers to explain why they should not take such nonsense seriously when they encounter it.
What I said that set off the crazies was that there is no such thing as "trickle-down" economics. Supposedly those who believe in trickle-down economics want to give benefits to the rich, on the assumption that these benefits will trickle down to the poor.

As someone who spent the first decade of his career researching, teaching and writing about the history of economic thought, I can say that no economist of the past two centuries had any such theory.

Some of those who denounced me for saying that there was no trickle-down theory cited an article by David Stockman years ago -- as if David Stockman was the last word, and I should forget everything I learned in years of research because David Stockman said otherwise.

What is often confused with a trickle-down theory is supply-side economics, such as that advocated by Arthur Laffer. That theory is that tax cuts can generate more tax revenue for the government because it changes people's behavior, causing more economic activity to take place, leading to more taxable income, as well as a faster growing economy.

It is not hard to find examples of when this happened -- for example, during the Kennedy administration, among other times and places.

Whether it will happen in a given set of circumstances is what is controversial, but none of this has anything to do with money trickling down from the rich to the poor. It has to do with the creation of more wealth in the economy as a whole.

The notion of a trickle-down theory is debunked on pages 388-389 of my book "Basic Economics" (2nd edition). But most of those who went ballistic over my denial of a trickle-down theory were not seeking further information.

As far as they were concerned, they already had the absolute truth and only needed to vent their anger over my having dared to say otherwise. That is a sign of a much more general and much more dangerous trend in our society today that goes far beyond a handful of true believers foaming at the mouth against one columnist.

If education provides anything, it should be an ability to think -- that is, to weigh one idea against an opposing idea, and to use evidence and logic to try to determine what is true and what is false. That is precisely what our schools and colleges are failing to teach today.

It is worse than that. Too many teachers, from the elementary schools to the graduate schools, see their role as indoctrinating students with what these teachers regard as the right beliefs and opinions. Usually that means the left's beliefs and opinions.

The merits or demerits of those ideas is far less important than whether or not students learn to analyze and weigh those merits and demerits. Educators used to say, "We are here to teach you how to think, not what to think."

Today, students can spend years in educational institutions, discussing all sorts of issues, without ever having heard a coherent statement of the other side of those issues that differ from what their politically correct teachers say.

There are students in our most prestigious law schools who have never heard arguments for the social importance of property rights -- not just for those fortunate enough to own property, but for those who don't own a square inch of real estate or a single share of stock. How they would view the issues if they did is a moot point because they have heard only one side of the issue.

People who go through life never having heard the other side of issues ranging from environmentalism to minimum wage laws are nevertheless emboldened to lash out in ignorance at anyone who disturbs their vision of the world. The self-confident moral preening of ignoramuses is perhaps an inevitable product of the promotion of "self-esteem" in our schools.


Post a Comment