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  1. #1
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    Default Trickle down economics

    Can someone explain this to me? I realize that I'm posting on a game forum, but there seems to be a lot of people out there that talk like they know something about economics, so I thought I'd ask.

    Here's my understanding of the theory - tax breaks for the wealthy results in more spending by the wealthy which results in a boost to the economy.

    However, the problem I have understanding this is that the wealthy are more likely to travel abroad, drive imports, buy property in the Caribbean, and worst of all have off shore bank accounts. I'm not saying that all the money they get from a tax break would go to these things, but they are much more likely to with the upper 5% than for the lower 95%.

    So, in my mind, if there's a tax break of $200 000 for one rich person, some of that will go into the domestic economy, but some of it won't.

    On the other hand, if there is a tax break of $200 for 1000 working class and middle class people, that money is almost certain to go into their Chrysler mini vans, the mortgage or new porch on their house, their new gaming rig, or their vacation in Vegas etc.

    I think I'm missing something critical here. Please post if you can explain this to me.
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

  2. #2
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    Trickle-down is basically a bastardization of supply-side economics, and not really a true academic school of Economic thought, so much as a politcal-economic argument. Basically it says benefits to the rich trickle down to the lower classes. Supply-side Economics is a whole different beast.

    The basic premise behind supply-side economics is that production drives Economic expansion/growth. By reducing taxes on business and capital gains, increased investment in production will result, which means more Economic growth.

    I prefer different models myself, and think the Economic system is a bit more complex than the model supply-siders would have us accept, but I concede some of the points they bring up.


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  3. #3
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    Hmmm. Interesting. Wouldn't that model, that assumes that decreasing taxes for companies will result in more investment, be a little muddied by the global nature of economies today?

    For example, provide a telecom company with a tax break and they may rebuild their call centre in India, where labour is cheaper.

    With my limited understanding of economics, this model seems a little outdated and simple. Human behaviour, particularly when viewed at the sociological level of abstraction, seems a little more complex that what I understand in supply-side economics.

    On the other hand, what I just read on wiki says that no one has ever actually claimed the trickle down theory as their own. It seems like it may be a purely political concept; a term used by democrats/liberals to accuse their counterparts of pandering to the wealthy.
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

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    Indeed, supply-side Economics, and most economic schools at that rate, tend to use models that assume a closed system, which is why most models fail.

    Your view of human behavior if extrapolated into Economic schools, would probably put you in the heterodox schools including; Austrians, Behavioral, Evolutionary, and Complexity schools.

    As for trickle down, it is indeed not a real practiced theory, and most likely little more than a disparaging term used by populists or class warfare politicians.


    "Everytime you PK a newb, a breakdancer shitkicks a baby."-Goty

  5. #5
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    Vanno,

    Thanks for the information. I appreciate the time you took to put that together.

    I think, but I might be wrong, that I just had an intelligent conversation on a darkfall thread.

    Thanks again!
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

  6. #6
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    No problem, it is nice to have a discussion about Economics without the conversation devolving into polemics and political hackery.

    By the way, here is a decent youtube link if you want a preliminary introduction to heterodox schools, specifically Complexity Economics. You don't need to be particularly learned in Economics or sciences to folliow.

    http://www.youtube.com/watch?v=dBCk1f52Wvg
    Last edited by Vanno; 09-30-2008 at 08:41.


    "Everytime you PK a newb, a breakdancer shitkicks a baby."-Goty

  7. #7
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    Quote Originally Posted by Vanno View Post
    No problem, it is nice to have a discussion about Economics without the conversation devolving into polemics and political hackery.
    Due to the fact that no one else responded.
    Spoiler

  8. #8
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    Quote Originally Posted by Virtra View Post
    Due to the fact that no one else responded.
    True enough; I'm sure the pleasantry will be short lived.
    Last edited by Vanno; 09-30-2008 at 08:49.


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    Quote Originally Posted by Vanno View Post
    True enough; I'm sure they pleasantry will be short lived.
    Asshole!
    Spoiler

  10. #10
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    lol
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

  11. #11
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    Quote Originally Posted by Vanno View Post
    No problem, it is nice to have a discussion about Economics without the conversation devolving into polemics and political hackery.

    By the way, here is a decent youtube link if you want a preliminary introduction to heterodox schools, specifically Complexity Economics. You don't need to be particularly learned in Economics or sciences to folliow.

    http://www.youtube.com/watch?v=dBCk1f52Wvg
    Vanno,

    Thanks for the link. Very interesting stuff, even if it is basic. I like the way the information is presented too. As a former teacher, it's cool to see something as potentially complex as economics broken down into simple components which are then built on.

    Thanks again.
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

  12. #12
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    Well we can look at the George W bush S-corp. This is where you dont take a paycheck from your own business(making you poor) and build up your tax break through corp spending. In theory one could spend 100% of the corp profits on expansion over the course of a few years and build up a 100% tax break on their one time income of 100s of thousands of dollars at the end(bullshit).

    The idea is to build the corp and the jobs it can produce quickly. More jobs means better economy. The same goes for the trickle down theory but if you ask me the rich are rich because they dont let it trickle down. They hold on to it and never let anyone else ever get any of it. In fact if I have $5 and you have 5 cents I have that much more "capitalistic" power. This power is the goal and not so much the amount of money or even vibrancy of an economy. It simply the power that comes with it and that is not something one would let "trickle down".
    Last edited by 5%Luck; 09-30-2008 at 12:12.
    It is hard to see the life being choked out of the other side by the same hand that is wrapped around your neck when you soo surrounded by darkness

  13. #13
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    So, 5%Luck, if that is your name, I sense trace amount of anti-capitialist vigor in your writing. While I don't necessarily disagree with the principle you are objecting to (hoarding), I'd be interested in whether you think there is a solution to this, and what it might be.


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    A solution hrmm.. Id have to say that lay in family values. If you were to take you family as you corporation and see your neighbors as friends and then further remove a larger economy you would end up with self sufficient peoples.

    Really, The family is the heart of any proponent of any value and should be at the sole of any means. If we were not taught by strangers(teachers) and taught by family we wouldn't have any basis for competition. That would lead to a smaller amount of goods but if you learned in the 1st the wonders of self procurement and the sence of self respect that comes with it you wouldnt know what it is to have "too much".
    It is hard to see the life being choked out of the other side by the same hand that is wrapped around your neck when you soo surrounded by darkness

  15. #15
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    Quote Originally Posted by 5%Luck View Post
    A solution hrmm.. Id have to say that lay in family values. If you were to take you family as you corporation and see your neighbors as friends and then further remove a larger economy you would end up with self sufficient peoples.

    Really, The family is the heart of any proponent of any value and should be at the sole of any means. If we were not taught by strangers(teachers) and taught by family we wouldn't have any basis for competition. That would lead to a smaller amount of goods but if you learned in the 1st the wonders of self procurement and the sence of self respect that comes with it you wouldnt know what it is to have "too much".
    So, I'm an orphan. Does that mean I have no place in your capitalism?
    The sad future of MMORPG:

    Quote Originally Posted by Vaedathor View Post
    lol y ? in my oppinion u shouldnt play these games if ur over age 20 .. just get job and life .... NOT MEANING TO OFFEND, JUST OPPINION

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