Trickle down economics: beautiful and untrue

Reality is a uncomforting idea for folks, whether you’re a blue-collar plumber or a wolf on Wall Street. People have a lPve for ideas that are simple – easy to understand and pretty in diagram-format – that confirm what they desire with disregard for truth. I wanted to explain that idea in terms of economics, or better put, “economics”.

Simplicity for simplicity’s sake is one of those yearnings that unfortunately goes too far. Take the famous model, Kuznetz’s curve. Nobel Prize-winning economist Simon Kuznets began the first systematic study of inequality in the United States in the early 1950s. His monumental work traced income distribution from 1913 to 1948, and Kuznets noticed the hastening reduction in income inequality at the time. Compare this to the previous era before World War I (which started in 1914), when inequality was much greater. Since inequality was great during the early stages of American economic growth, and it decreased as the country industrialized, Kuznets announced the clear causation. Although skeptical at first, he declared that income per capita fit a neat little bell curve:

File:Kuznets curve.png

Though Simon Kuznets recognized his model was “too easy”, the overwhelming number of economists, wealthy businessman, and politicians embraced the idea that inequality would fix itself with no work on part of the elite. The model was simple and a perfect parabola, therefore it was considered true. Of course, factors such as two world wars and a Great Depression were by and large ignored in considering the Kuznets curve – because “complications” are steadily avoided by economists. It is confirmation with aesthetically pleasing graphs that drives American econo-politics to this day.

Simon Kuznets, however unintentionally, lit the spark for contemporary Reaganomics. Reviving Enlightenment era speculation, neoliberals stand in awe of Adam Smith’s “genius” for discovering what is so “simple but true”. Laissez-faire has become a way of life in its own, where economic freedom from government is tied to all other sorts of freedoms in the very American tradition of ethical militarism, theocratic pluralism, and multicultural patriotism. The philosophy where government nonintervention magically keeps the world running through the guiding fingers of the “invisible hand” was made commonsensical through bemusing associations with God and country. The comforting idea of having the “markets decide” isn’t an idea based on proof or analysis, but on its own enshrined romanticism. The economy runs itself because I believe it does, and I believe it does because it is beautiful like so. It works because it has to work, otherwise my own understanding is wrong – which, of course, it can’t be. It is so simple that it has to be true. America has always been this way, and God wants it to stay this way. Plus, a bell curve says so.

The bandwagonny libertarian mindset mimicked above is bloated with irrationality and self-confirmation. It may be true that with careful analysis and study supply side economics could be convincing. It may be true that smaller government and regressive taxes would result in equitable trickle down. It may be true that a more comprehensive conclusion to Kuznets’ data would hold similar principles. What is certain, however, is that by and large conservative proponents are bubbling in the centuries old mantra of government nonintervention not because of careful consideration, but because it’s a simple, beautiful, and “what-my-friends-in-college-said” idea. It helps to have God, country, and a bell curve on one’s side too.


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