Brett Rants

Fountains of Knowledge

A discussion on the theory of Step Down Economics... and other such matters as shall come before the court.

'It works!'
'No, it doesn't!'
'Yes, it does!'

Please don't be expecting me to settle the debate any time soon.

NOTE: at the beginning of this project, I had an erroneous conception of what others meant by Trickle Down Economics. To wit, I had thought the diagram below was representative of Trickle Down Economics. It is not. Thus, what I thought was Trickle Down Economics I will now call Step Down Economics and use Trickle Down Economics in the same way the rest of the world does. Now, it may in fact be true that to some Trickle Down and Step Down mean the same thing; but as I believe such beliefs are in the minority, I will not belabour the point any further.

a graphic with steps to the right and one large plunge to the left, a flow to the right would indicate trickle down economics works, a flow to the left would indicate it does not

If Supply Side Economics (the true name for Trickle Down Economics) is taken to mean less tax on the rich and more tax on the poor then it is obviously a bad deal for the poor; and I have a hard time understanding how anyone could argue otherwise. I mean, it is a clear inequity to tax a person in possession of a single dollar bill at a greater rate than someone who holds two.

In fact, tax preference for the rich is such an untenable idea, I am inclined to believe proponents of Trickle Down Economics are in fact proposing some sort of flat tax. Or they are assuming rich people (or far more likely, business's) expend their money differently than poor folks: that the rich tend to spend money in a way that slowly seeps through the economy (a concept I will call Step Down Economics, and which in the diagram above is shown on the right and is typified by the purchase of capital goods) while the poor tend to spend money in a way that exits the economy more rapidly (as shown on the left in the diagram above and as typified by the purchase of consumables like wine, cheese, and caviar... or, um... chips and beer); and that the former type of spending is more beneficial to a society as a whole than the latter.

But even this second interpretation won't hold... mostly because the above figure is not an accurate representation of the monetary flow through any known society.

Thus if you want the short answer neither Trickle Down nor Step Down Economics will work as advertised.

A Brief Introduction to the Subject

I went on a walk, saw a fountain, and it reminded me of Step Down Economics (or what I would have erroneously called Trickle Down Economics at the time), as some of the water hits every pool on the way to the bottom... and some just went straight to the bottom.

Given that bit of randomness as the starting point, here's the Million Dollar Question:
Does Step Down Economics work?

Yes! But, of course. What a silly question.
Or maybe your opinion of the matter falls more in line with:
Does Step Down Economics work?

No! What? Are you daft?
In my personal opinion, the real answer is one of those nuanced things, which comes down to:
  1. What a person wants?
    • Something you'll have to answer for yourself...
      • keeping in my that the rich want what they want; and are, probably, best served by spending money in a way that achieves those goals...
      • while a very similar thing could be said for the poor... or any other group of people for that matter.
    • But whatever your answer, your feelings on Step Down Economics will likely closely align with your position in society.
  2. And what does one mean by Step Down Economics in the first place?
    • After all, it is easy to call something one thing, when in fact, it is actually something else.
      • As in fact, I would have referred to Step Down Economics as Trickle Down Economics only a few days ago.
    • And it would take quite the Elitist World View to argue that the poor will benefit more from indirect payments to the rich than direct payments to themselves.
      • But, hey! They're poor! So, let's be Elitist and declare that we know better than they, which we just well may.
So, please feel free to reread the above until you are ready to admit that you really don't understand what I am talking about. And then trust, that since I'm one of the Economic Elite, you should (probably) just do what I say.
Please bow low, you stinkin' commoner.
Jokes aside (but please remain prostrated until I am through with this introductory segment), the first item above (#1, if I'm talking too fast for the wretched imbeciles in the audience) is an opinionated statement (so, good lucky proving it), which I shall leave to others to discuss, trusting that each of us can tell the difference between someone pissing in our boots and calling it rain.
Hey, babe! Do you like it Wet & Wild, because I hear good things about those-them-there Water Sports.
Which is to say, I think we can take it as a given that the rich want what the rich want and the poor want what the poor want... even if these two groups are so divergent as to defy any simplistic such grouping.

So rather than addressing that (possibly moralistic) quagmire, I'm just going to move on to the second part (#2 in the above for the simpletons in the audience, it's the Step Down part... and I'm just going to keep my fingers crossed, as I hope I don't get into too much trouble for that Water Sport joke, but whatever, suffice to say), understanding Step Down Economics (or even, the ever more popular Trickle Down Economics) requires a solid understanding of money. I mean, how can we trickle, step, or do anything with money, if we don't even know what money is, in the first place.

So, let's start there: with a simple introduction to money.



I've reread this article (rant, and/or patent waste of disk space) over a few times and I think it would be helpful if I started by briefly explaining the difference between my conception of Step Down Economics and classical Trickle Down Economics.

But to do that, I need to talk about my conception of the Market for a moment, because for (you and for) me, The Government and the Market are One.

The Government and the Market are One

The Government makes the Market. The Government controls the Market. And the Government relies on the Market. It's not a symbiotic relationship. The Government and the Market are One. They cannot be separated. They are the same thing.

Government as the Root of All Evil

So, it's not enough to say that proponents of Trickle Down Economics advocate reduced taxes for the rich. Because such a statement fails to take into account the source of all wealth in the first place: The Government.

If you're rich, it's the government's fault.

And if you're poor, it's the government's fault.

The Government creates, runs, and controls the systems that both create wealth and decide who gets that wealth, in the first place. So, interpreting Trickle Down Economics as synonymous with reducing taxes for the rich as an engine of economic growth is a non-starter. It's equivalent to saying Lotteries are an engine of economic growth. I mean, they may well be. But so what? If you're happy sparking economic activity by giving money to a random person, please give it to me. I promise to spend ALL of it.

The Social Construct

In the above, I talk about how the government decides who is rich (by winning the birth lottery, for instance, among other things) and who is poor (by having one's livelihood taxed at a greater rate or by having one's liberties curtailed at the behest of another: call it slavery: and I think we can all see how that might make one person rich and another person poor). Of course, in response, one can start (yammering on, er, I mean) talking about Social Mobility in a Free & Open Society. And I will quickly concede that in our society it is relatively easy (whatever that may mean) for an individual to change their position within society (to work hard and to raise themselves up). But if I concede that (which I happily will do), it's only fair for you to concede that however easy it may be for any one individual to change their position in society, it's rather difficult for that same individual to change society as a whole

Lord knows, many have tried.

The truth is: society's change (predominantly) in reaction to outside forces. They are in perpetual competition with other societies. As in, may the best society win.

And what I mean by Society is The Government, The Market, The Culture, the this, the that, The Social Contract, the whole shebang. There is not the one without the other.

Which is to say, I am happy to use Government and Society as synonymous terms for the purposes of this rant.

But that's not really what this rant is about, so you're really just going to have to take The Consolidation of Power as a given.

Step Down Economics

Societies are in competition with other Societies: May the Best Society Win.

If Society, the Government, and the Market are all one and the same (nomenclature I am sure I will have to work on; and a fact you may well believe I have not shown to be conclusively true), then the Best Market Wins.

I take Step Down Economics to be an attempt by The Government to create a better Market (read: improve itself) by selective spending (tax breaks and governmental subsidies being effectively congruous) in order to Form a More Perfect Union.

So, to me the question is: Can the Government spend money in such a way, so as to improve the Market. And if so, how?
By giving money to the rich?
By giving money to the poor?
By giving money to business owners?
Or by taking some other action?
I'm not promising answers.

But I'll be looking at whether it is possible for a government to spend money in such a way that a rising tide floats all boats.

And with that said, let's go back to money and where it all began.

Graphics just don't get any simpler than this, four arrows (orange, if you care) linked into a circle (so, like a linked list) with one leading to the other in an endless flow

Imagine four people standing in a circle. And whenever one receives any money (in payment for something), they spend it right away (purchasing something else), as they hand the money off to the next person in the loop, in an endless flow of commerce that goes around... and around... and around.

In typical economic models, the faster that money flows around in a circle, the better off everyone is... which is true, as long as one assumes money is an 'End' rather than a 'Means'.

Money Simplified

In an Ideal World, money has meaning: it is solid, static, and innate. I mean, that is not how money works in the Real World, but a guy's got to start somewhere. And in this imaginary, non-existent world, money is conserved, it flows, it circulates. It's like a bunch of friends standing around in a circle, trading stuff: money for this and money for that.

Only, this is not the way most friendships operate: mostly, friends give stuff to each other.

In fact (for the most), friendship works on what Economists (or at least, this Economist) like to call a Gift Economy, which is more of an honour system than anything else.
'I'll get this round, you get next.'
'But I got last?'
'Which is why you're getting the next.'
'I'm getting confused. Are you sure you're right?'
'Oh, I'm sure. But I am starting to wonder if you're poor on account of your being a complete and utter moron.'
'Nah. It's not that. It's because I'd rather live my life and go out drinking on a Saturday night than staying at home, studying the stock market, and investing in over-priced brewery stocks with inflated PE's.'
'Um, so when I get back with those beers, bud, why don't you tell me what you'd buy, instead.'
'Make it an import and you got yourself a deal.'
Money permeates life. But for the most, friendship is not about money (even if it informs who we choose as friends).

Rather, money modulates (now, there's a fancy word) exchanges (call them monetary transactions) between strangers, because (for the most) the larger world could not give a rat's shiny-heiney about your stock picks... or most anything else you have to offer, including your sense of honour... or my sense of humour.

And the sooner you realize that... um, the sooner you will become a money grubbing cynic, just like me.

But really, what I want you to remember most about all of this is that Money & Honour have absolutely nothing to do with each other. There are no Shoulds in the Economic World.

So, it's not that Greed is Good or Greed is Evil. Rather (and very simply), Greed IS.

Believe otherwise at your own detriment and peril.

An image of a gold coin (well, that is not really shown, but it is the intent) and a sword (ditto), so visual depiction of inate worth of gold and the value of carrying a big stick

Quick! The zombies attack! Do you grab a bag of small denominational gold coins that you have been hoarding your entire life? Or do you grab your granddad's hunting rifle and pretend you're the lead character in some sort of Video Game Movie Adaptation of the Zombie Apocalypse?

Or in other words, some folks think gold has some sort of intrinsic value. But they are wrong. And it does not.

'Argh! Brains!'
'If you want my frickin brains, read my posts, ya inbred, zombie loving, Metallist!'

Metallism vs Chartalism

Where did money come from?

There are two theories... and/or two theories currently duking it out in academic circles.
I recognize that Metallism is the popular view. But I, also, recognize that most people are idiots.

Oh, wait. Maybe you believe in Metallism. So, forget I just insulted you. And rather, imagine you are standing in a circle with your friends (or at least, equals) and you can make one last series of trades... and after that, you can never-ever (like, ever-ever-ever) trade again (never). So, what do you want to wind up with at the end of that trading session?
Metallists essentially argue that in such a situation the vast bulk of human beings want to wind up with as many gold coins as they possibly can.

Whereas, Chartalists point to the... um, less than heroic behaviour of many {most, any, all} human beings throughout history; and so, at least some small fraction (and quite possibly large fraction, approaching the entirety of) the human race would go with that-there gun option and grab all the gold, all the land, and all the women for themselves.

Oh! But, hey! Slaves are good, too!
'So, I'll tell you what. Give me a stack of gold coins every year for the rest of your miserable, pinko-commie, non-gun-owning life, and I won't put a bullet through your head, right here and now.'
'But you have all the gold coins?'
'Yeah, so I guess you're going to have to earn each and every one of them-there gold coins the hard way, slave boy.'
Believe what you want to believe. I believe in Chartalism. It explains so much, as there are so many things I prefer over gold... like food, for instance.

And in fact, if the Metallists were to argue that grain was used for money prior to gold (or cattle or women or land: a stance that would require their changing their name to Materialists), I would have no call to argue the point. After all, central storage of grain, city states, and a standing army were all developed at more or less the same moment in history... but then, we are pretty much back to Might is Right and a bunch of sword wielding psychopaths, telling everyone else what to do on pain of torturous death.
'You will address me as Your King or Your Lord. You will bow low whenever I enter a room. Oh, and I especially liked what that crazy scribe had to say about perpetual yearly payments. So, yeah. One gold coin from each one of you raggedy-heined cretins each and every year until the end of time, itself... as is my proper due. And if you miss a single payment, give me any lip, or one of your great-grandchildren starts talking smack about Chartalism, I swear by The Glory the Universe has Bestowed Upon Me I will smite you where you stand. So, um... do we have a deal? Or like I said, I'm good with killing the lot of you, until you are dead, right here and now.'
I don't know if this means Locke was wrong about the Social Contract or not; but I do know tax evasion is a criminal offence enforced by a police force, who in my neck of the woods, carry weapons openly... and wear bullet proof vests, because, apparently, some folks want to shoot back.

Eh, it' sort of like Rock, Paper, Scissors. Only, it goes Fiat Paper, Gold Coins, Military Force. And Military Force beats all comers.

But the thought is getting me down, so let's turn our thoughts to the happier subject of money.

Same circle arrow graphic as before

Have you ever watched the TeleTubbies?

One TeleTubby has a shiny gold. But his neighbour does not. So, the first TeleTubby gives his shiny gold coin to his neighbour.

But, this is a TeleTubby episode, so it doesn't end there. And fifteen minutes later, the plot has still not progressed one iota.

One TeleTubby has a shiny gold. But his neighbour does not. So, the first TeleTubby gives his shiny gold coin to his neighbour.

And so on and so forth until your head explodes, the weed wears off, or you get off your lazy behind and switch off the television.

Seriously, you're a grown man!

Why are you watching the TeleTubbies?

Money Makes the World Go Round

It's not complicated.

Money goes around in a circle. I sell something. I get money. I buy something. I pass that money along. And around and around it goes, endlessly.

Nothing could be simpler.

Only, this is not how money works, because it doesn't take into account the Long Arm of the Law... and all the other governmental agencies out there.

So, this is just that circle of money going round and round with a force applied to it as a sort of primer and to get it doing, that force is a cascade of red arrows flowing down, representing governmental spending, i.e. taxes

This is basic Keynesian Economics, in which more government spending results in more consumer economic activity. The party line is that government spending 'facilitates' more economic activity. But the truth is, more government spending 'causes' more economic activity... to pay for the taxes... to pay for the government spending. Or in other words, without the government spending, the vast bulk of economic activity would come to a halt, as folks with actual freewill decided they'd rather go fishing than getting a job (catching fish for someone else) or decided to write a blog for their own amusement (which is what I'm doing) than writing for the market (which is what that other site with a million page views is most likely doing).

Enter the Tax Man

Sure, money goes around in a circle; and ignoring credit and debt for a moment, it has no beginning and has no end.

But be honest: if most things were free and didn't cost money would you bother with money?

Overwhelmingly, indigenous tribes (modern day hunter gatherers) reject employment and try to carry on in their old (pre-contact) ways for as long as possible; mainly, because it's more fun. I mean, sure. There was a large market in the burgeoning American Northwest, in which beaver furs were traded for iron hatchets. But as happy as those Indians were to hunt a little more than they might otherwise have, few of them wanted to work as hired hands in an industrialized gold mine.

Working down in the hole sucks. It takes a whole lot of coercion (call it lack of any viable alternatives) to get a guy to spend his days breathing dust a quarter mile underground.

That coercion is represented by those red arrows (in the figure above), which turn the economic engine of the world. The arrows are red, because in the whole, governments are a bad idea (whose time will soon come). I take it as self evident that in a Free World, nobody would put up with taxes. And in a Free World, no one would ever agree to toil their life away so another could live easy.

But the world is not free.

And the government is not all evil.

Remember, when I was talking about how that one guy with a sword (or a whole bunch of guys with swords) let another bunch of guys live for the price (symbolically speaking) of a single gold coin a year for the rest of all time. Well, it could have been worse. They could have asked for two coins a year... or three... or a hundred zillion million.
'No! I do not expect you to pay that much money! I expect you to die! Mu-ha-ha!
So, there is no doubt, the government serves a purpose: to stay in charge and prevent less noble rulers from gaining the upper hand.

Eh, maybe they have lost the battle.

Or maybe staying in charge is harder than it might otherwise seem; and so, to stay in charge, the powers that be must broker all sorts of nefarious bargains with all kinds of parasitic parties.

It gets complicated.

And some folks think that other human beings are intrinsically nice or something. But I've read enough history to know differently, so you won't be fooling me with any of that Do Gooder mumbo-jumbo.

Whatever the case (and whatever your opinion), any money the government spends is not part of the Circle of Commerce. It doesn't create; it controls. It does not arise from freewill, but from the point of a sword.

But let me reiterate a point I made way back at the beginning, that is neither a good thing nor a bad thing. It is a thing, which IS... and which is inevitable, as well, which maybe is another reason why I don't rail against the government and the status quo as much as I otherwise would.
Sure, it sucks.
But it could be worse.
And guess what, worse is more likely.
Personally, I think one can judge a government by tallying up how much said government costs (taxes; and so on) and weighing this against how much it provides... not being killed by Barbarian Hordes just as a for instance.

In short, parts of the government are good. Parts of the government are bad. So, saying whether a government (or any aspect of said government) is good or bad gets tricky... which brings us (pretty much) back to where we started.

This is a composite of the Waterfall and Trickle Down model, the waterfall landing on the trickle down model

This isn't 'accurate' to me, but metaphorical models often aren't. Whether a government expenditure is 'good' or not is a matter of opinion. If one likes it, it's 'good'; and if not, it's 'bad', call it fat... or since I like to call a pig a sow, inefficient governmental flows of money are (often) an indication of political favouritism and corruption.

This is the same as the original Trickle Down image

This is a metaphor: a lie. Money never trickles down; it is simply spent. The real question is whether the money is spent on something worthwhile. And sometimes, not being punched in the face and/or avoiding a lengthy prison term is a worthwhile cause.

Government Is Inevitable
An Abusive Government Is Not

Waste is inevitable.

Bad decisions are inevitable.

Some degree of corruption is inevitable.

And you and I disagreeing about basic ideological principles is (most likely) inevitable.

Thus, it's highly unlikely you and I will agree as to whether any specific Step Down Program will be desirable.

Are you pro military? Then you are likely to favour expenditures (call them Step Payments), which favour the military.

Are you pro-education? And think that the government is up to the task? Well, then. You are likely to favour expenditures, which you feel favour education.
'But wait a second,' you might say. 'These are policy decisions. Trickle Down Economics implies giving money to the wealthy on the presumption that giving more money to the rich is good for the poor, because it trickles down to them. I mean, it's in the economical theory's name. And that sort of thing obviously benefits the rich at the detriment of the poor. It just gives the rich guys more money to hire housekeepers at slave labour rates. And it's obviously no good.'
Sure. I'm not going to disagree.

Rich people suck.

And the government sucks.

So, whatever they do will suck.

I could not agree more.

But I'll add to that.

You suck.

And I suck.

But much more importantly, the difference between your suckitude (oh, sucky one), my suckitude (please let me suck-it-to-you), rich people's general level of suckitude (the suck masters that they are), and the government's overwhelming degree of suckitude (gads, but does the government suck) is not that terribly different.

We all suck.

So, if you want to take the side of the poor (not really sure I care about them, myself, but oh, well), then realize the problem is not so much how the money is spent; but rather, that the money is being spent in the first place.


When the government spends money, somebody benefits... and usually, those somebody's are pretty well off... or will be soon enough, based upon the government's expenditure of money in a way that benefits them if nothing else.

Maybe an example would work best here.

Money spent on education goes to teachers, administrators, and the buildings they work in. It does not go to students. Very few students are paid an hourly wage to attend lectures. Instead, the typical student exits college with some degree of debt. And I think we can all agree (from the student's perspective, at least) that is not a good thing. But having said all that, a college education is remarkably easy to come by these days. And I am willing to bet that by many measures, the education one receives (or is able to receive, as one can always cheat themselves) is better these days than it has been at any time in the past.

So has the money that has been spent by the government (on your behalf; and at the point of a sword, I might add) helped teachers, administrators, and building contractors. Oh, yeah! Most definitely! It has!

Has it also helped students? Well, I think so.

And that's Step Down Economics (and the only interpretation of Trickle Down Economics that makes any sense to me) in action.

And it's very hard to tease apart the benefits of greater access to educational opportunities for all... from the obvious disadvantages of:
But maybe even more importantly, the goal of spending money on education is not to simply spend money... or to give some money to a few lucky teachers... or to give said money to a bunch of students. The goal (the stated goal) is to improve educational opportunities by creating a viable education system. And to do this, one has to give the money to an Educational System (i.e. teachers, administrators, and building campuses), because if given a hundred grand, the average college student is just going to skip town and spend the next four years drunk in Cabo.

Which is symbolically what the average person would do (rich or poor, college professor or otherwise) if given a hundred grand. So, let me be clear, by Step Down Economics I do not mean simply giving rich folks (poor folks, or drunken college students) more money.

Rather, I believe that whenever the government spends money, the effects of the expenditure will "Trickle Down" through the economy (no matter what the money is spent on in the first place), so we might as well get something for the expenditure.

Here we have the water wheel in full swing be powered by more water

The More The Merrier

It doesn't matter what the government spends money on. The more that is spent, the faster the wheels of commerce will turn.

One thing is true, though: money spent in certain ways will have a more lasting effect, as it will tend to create structures that will perpetuate themselves. These structures (whatever they might be) perpetuating themselves is the Step Down Theory in action.

Or in other words, if the government funds libraries, there will be more libraries, librarians, and books.

And, um, librarians will, also, use their wages to buy sexy glasses, sexy red-gloss lipstick, and sexy-sexy librarian outfits. And these expenditures in turn will fund ever enlarging eyeglass, cosmetic, and clothing industries... the "Trickle Down" part... which I maybe should just call "Step Down", but I think you know what I mean.

A waterwheel diagram in which more water goes over the waterfall and so the commerces turns faster

More Better

After an increase in government spending, more money flows over the waterfall, creating more action in the (upper left quadrant; and therefore in the entire) Circle of Commerce (as the left quadrant pushes the entire wheel around).

If the governmental spending persists, this image will eventually look like the one above it, as the Circle of Commerce becomes more permanent.

So, this is an image of the government funding libraries. Whereas the one above is after the librarians are hired and they have already been spending their wages for some time.

Only the flow in the upper left quadrant of the Circle of Commerce has been increased, which can be effected by increasing taxes at large, and then, giving a rebate to a select group

Less is More

If governmental spending is reduced, the power applied to the Circle of Commerce is reduced, and eventually the economy will contract. That is to say, given time the double arrows will disappear.

I find it interesting to note that differences between governmental spending and a tax rebate are minimal (especially after one considers that a tax is a negative rebate or a rebate is a negative tax).

Or in other words, by not taxing certain things, the government subsidizes them. Once again, good/bad, more of an opinion than anything else.

Anyhow, back to those sexy-sexy librarians. If the government reduces library funding, librarians will become harder up for money and those double arrows around the rest of the Circle of Commerce will disappear as librarians become more frugal and cut expenditures (i.e. as Monetary Expenditures leave The Market).

Come On!
Take a Stand, Man!

On a fundamental level, I'm against Step Down Economics, because I am against Big Government. All things being equal (which they never are), a smaller government is a better government (you know, in my ever so humble opinion).

But like I said at the beginning, it really is more nuanced than that.

In the three preceding figures above, the waterfall represents The Sword Arm of Slavery. It's government. And it's undeniable that the more money the government pours into the system, the faster The Wheel of Commerce will go spinning around. And that ever spinning Wheel of Commerce is the economy. It's the Gross Domestic Product. It's everybody going off to work everyday, doing their thing, being a cog in the economic machine, as they do their bit to make those (economic indicator) numbers rise.

But here's the thing. I don't want to work... not for others, anyhow. Of course, that's likely a moot point in my life, as I'd have to guess I'm part of the Waterfall of Oppression, you know, that part of reality I tend to rail against.

But that's beside the point.

To me, it's undeniable that the faster The Wheel of Commerce spins, the more goods and services (along with technological discoveries) are made.

But that's only one side of the issue. In truth (and overwhelmingly), most folks want to be on the waterfall side of things, they would much rather be a Tenured Professor living the good life than a college freshman carrying a mountain of debt.

So in the end, I think Trickle Down Economics is a bit of a con (of course, that said, any policy is situational, so I'm talking about my perceived notion of the perceived situation and nothing concrete). Simply put, paying teachers more (or teaching in bigger and brighter buildings) doesn't, actually, help (not directly, anyhow) a college freshman in their quest for an education.

But do higher teacher salaries really hurt the slaves? Er, I mean the students?

Well, only if they (like me) don't want to work, because an ever faster spinning Wheel of Commerce means ever growing opportunities in the ever growing sphere of work... but it, also, means an ever growing obligation to work.

next Brett Rants entry

Home Brett Rants Index

It's not for me to say whether any of this is good or not.

For me, it is enough that it IS, as my interest is economical... not ethical.

© copyright 2018 Brett Paufler