Talk:Trickle-down economics

From the Ministry of Truth

This is an interesting sentence, and I've seen similar sentiments for two decades:

To Smith, the "well-governed society" is one in which free markets replace state command as the main method of resource allocation. Smith's argument is that increased division of labor (specialization) raises labor productivity. This in turn leads to lower costs, which are passed on to consumers in the form of lower prices (correcting for inflation).

This blockquote may seem uninformed, but I believe its inacuracies are intentional and politically motivated.

• "replaces state command" - Nations was written before Das Capital. Using the term "The state" instead of Nobility or Aristrocracy comes off as awkwardly anachronistic. "state command" is the language normally and appropriately used in describing controlled economies - communism. The rhetoric of the McCarthy Era. A more accurate portrait of Nations is that Smith made a solid case against corruption - as imbodied by feudal corporations, apprenticeships, monopolies, tarrifs, exclusive rights etcetera. For example, the nobility favored apprenticeships because the nobility was being paid royalties. The commerce that Smith witnessed and wrote about was a market economy, the complaint he made was that it was corrupted by special interest. Nobility (the state) - which was feudalistic, not communist - had their fingers in it along with many players outside of nobility and royalty. Any such arrangements in modern day U.S. would be illegal, and scandalous. As for "state command of resource allocation": Eisenhauer's Highway program was a state project which improved the transportation network of the United States, very much in accord with Nations, Chapter III, "the division of labor is limited by the extent of the market", wherein Smith explains how water carriage (boats) extend the market and therefore support improved productivity and dexterity of the labor force. Smith made one exception to controls / incentives in the economy: incentives to the military. And the phrase "tolerable degree of security" is frequent in the work. The U.S. military is quite impressive and it is state controlled. Further, Reagan increased military spending. On the other hand Eisenhauer warned of the 'military-industrial complex'.
• "well-governed society" - this, and "a tolerable degree of security" are qualifications. They are not central to his themes. For example, the free market economy he describes is wonderful assuming goods aren't stolen in transport.
• "correcting inflation" - costs were unnaturally high, not costs unnaturally rose. Whether or not inflation was a problem on top of an unfair market is a completely separate issue. Stagflation was a political hot button when supply-side economics came about, and to tack on 'inflation' to Smith's work for political points is manipulative - as is citing Smith in the first place. Quite the contrary to this orwellian interpretation, free markets often overheat and are characterized by rapid growth, heavy borrowing and inflation. In fact the Fed is currently keeping its eye on inflation due to very attractive interest rates.

== More from the Ministry of Truth == I pasted the following sentence from the article. It follows a line of reasoning that Smith advocated Supply-Side Economics.

A major variant of trickle-down theory would say that tax cuts for the rich, special benefits for them, subsidies for corporations, and in general, government/business cooperation would not simply provide direct benefits to business but would also help the middle classes and even the poor. In effect, it says that "what's good for business is good for the country."

Read the book! Incentives like these are EXACTLY what smith was critical of. It's the major theme of Nations. If an incentive benefits one group of producers over another, it's not a free market, and that's exactly what Smith's postion is.