Final nail in the coffin of "trickle down theory"

Remove all ads!

Researchers at the PERI institute have done a multi faceted study on rising inequality and how that affects the income at the middle and lower brackets. This new study takes advantage of factors other empircal studies haven't added to their research- like income earned from capital gains, landlord payments, untaxed forms of income, different levels of inequality in different states, etc.

The new data finds that a rise in income share at the highest levels doesn't actually lead to rising income or employment at the lower levels, and in fact drains income from them. For every 10% percent rise in income at the highest levels, there is an average 2% drop in the income of everyone else.

In analyzing the behaviours of higher income families with the new amount of wealth, this study finds that they most often do not use it to fuel employment or investment in the nations economy- the things most often done are increased international travel, increased buying of imported goods, and increased savings. Also, the money that they invest is invested into a global economy- stocks, bonds, and other things can be bought from any country and don't translate into american growth.

The study can be found here: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP225.pdf

 

I'm not sure how much that's news, really. I mean, we've already had data that income inequality has been raising since the 1980s and that the real income for the lower 50+ % has been stagnating...

 

I agree completely, but having empirical data that proves that definitively leaves only the most extreme cases still arguing that disproven theory

 

Not even Elmer's glue on the coffin. I wouldn't call this paper worthy of Science or Nature (or whatever social science review is of that level). This was not a rigorous study of the data.

 

The Political Economy Research Institute, in the University of Massachusetts, comes up with completely false data? You're gonna have to give me an argument for that one. Don't get me wrong, i'm all for being skeptical of respected sources. But if someone is dismissing said source without giving a justification I must be skeptical of that as well.

 

Did you read the whole thing? The More Complete Income model is the method that they used for the data conclusions. While he doesn't specifically say "trickle down" theory, the data he shows disproves the idea of increasing incomes for capitalists means increased income for the rest of us, which is exactly what that theory is. He specifically states the 10% increase 2% decrease in the study (i'm almost positive, i'm back on my useless old computer so I can't reread it), but if not he also says it here: http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7104

 

damedog, the "trickle-down theory" basically states that better tax conditions (I.e. tax cuts), especially for big businesses and the rich in general make everyone wealthier. Further, since the economy naturally grows, there is an implication that such conditions will provide for faster growth that would be achieved without them.

In order to contradict the theory, the study should provide evidence that, say, the rich have gotten richer, but other groups (ideally everyone else)' income has stagnated or gone worse when adjusted for inflation, taxes, etc. I skimmed through the text but it doesn't state or try to prove that. It mentions that inequality has grown, but you can have growing inequality and growing net income across all groups.

 

Interesting points Shaman, though one of the things I've been reading over the last few years is that pay has stagnated for the last couple of decades except if you happen to be in the top 0.5% of earners in the USA. Its grown there.

So while you may be laying out a fair question for damedog to answer it appears from what you touch on that his general point is correct even if you don't feel this particular study proves it.

 

damedog, do you know what "not a rigorous study of the data" means?

 

He admits it was mere speculation? What?

"So we extended that previous literature to a new question: what is the impact of rising inequality at the top end of the distribution on the standard of living of your typical family or your family at the bottom of the income distribution?

JAY: So what did you find?

THOMPSON: We found that in fact the relationship is negative. So the higher the top share goes, so the--when the top 10 percent increase their share of income from 30 percent to 46 percent like you mentioned, we found that the impact on middle-income household incomes falls, and the impact on household incomes of families toward the bottom of the distribution also falls."

I didn't even hear the word speculation in the entire interview.

T2- Yes, I do, but you simply saying that doesn't make it true, that's why I ask for some type of reasoning.

Tax cuts= more money for the top income shares. Apples and oranges

If he actually didn't say that finding in there I apologize, I read it and I am almost positive he said it near the end of the study, but I can't check until later tonight when I finally pay the cable bill again. However, I read the interview before the study so going in I already knew the data conclusions, so I readily admit my brain might have played a trick on me.

 

No, I guess you dont. Not having a rigorous study of the data does not mean they falsified the data (as you seem to want to claim I said). Did you look at their analysis of the data? Did you see anywhere the authors tried to validate pay increases of experienced workers versus workers with little experience? At what point did the authors exclude the unemployed from the calculations (I hesitate to use the word statistics here because there does not appear to be a statistical evaluation anywhere in the work itself, only in the referenced data)?

The income theory and methodology looks pretty lax to me -- it is basic to the point of being elementary. These guys are taking guesses and don't have any statistical theory to back up their guesses. They even claim the be telling a "story."

Why do you think this is a significant work? It hasn't even been picked up in a major journal yet (meaning it has not passed peer review).

 

I knew I wasn't crazy! Sorry Blackthorne, but it was in the study...I had just linked you to the wrong one. Quite embarrassing, really. Sorry about that, mate. And after you went through the trouble of reading 58 pages of tediousness and everything

Anyways, here's the real one: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_251-300/WP258.pdf

The beginning of the findings, and the numbers I stated previously, are one page 14. The things I said in my third paragraph are also in the study, referenced from another one.



T2: Not accepting your claim of false data (not falsified data, as that would mean it was intentional) simply because you say it is so doesn't mean I lack an understanding of what a thorough study looks like, that's why I asked for an argument for your claim.

" including a host of controls for relevant economic factors, such as
the unemployment rate, hours worked, and industrial composition."

So yes, they do look for those factors.

 

Please tell me you've simply misread all my posts (or didn't read them) and are not this clueless. I never said the data was false.

I tell you what -- pick up a copy of "Science" or "Nature" to see what really good research is and how it should be presented. Or better still read a Nobel Prize winning journal article (economics would probably be a good place to start). After you've read a few of those then look again at the paper you've linked.

 

You specifically stated that you thought it was wrong, unless you count amounting it to guesswork as not claiming it as false.

"These guys are taking guesses and don't have any statistical theory to back up their guesses."

And before you call someone "clueless", it might be a good idea to bring up some type of, you know, evidence of your claims. Everything you've said so far amounts to calling it unscientific, without giving any specific reasons why you think so and only claiming that nobel prize winning works and other journals do it better- all the while acting condescending while doing it. If you knew as much about science as you claim, you would know to provide evidence and an argument if you were going to claim other evidence as wrong or faulty in some way. Instead, your argument comes off as a giant appeal to authority without actually showing any information from any authority. Your say-so alone doesn't justify any evidential weight, so saying "I don't understand what a rigorous study of the data means" simply because I didn't accept your claim of it not being so as true with you presenting absolutely no evidence to support your position makes you seem less an expert of scientific rigor and more someone who lacks a real argument.

 

@ damedog, I think you're stepping on your pud a little bit here. When it comes to science and data analysis, T2 knows his sh*t. He is, after all, a scientist, and a pretty good one from what I understand. If you feel he hasn't sufficiently explained the problems he has with your study, then I have to agree with T2 that you don't seem to be listening to what he's saying. This:

...is pretty damning to me – especially the last bit – and seems to directly answer your question. Frankly you're the one coming off as the party unwilling to listen to opposing viewpoints (in this case, anyway - I've enjoyed your other recent posts), even going so far as misquoting T2 in your first response to him. I, like you, generally think trickle-down theory is a load of bunk, but this study is hardly a strong enough argument against it. And as you'll come to find out, people around here seem to be pretty good at sniffing out weak, flawed or downright dishonest articles cited to prove their respective points.

Dial it down a notch, I guess, is all I'm saying.

 

T2's a scientist? Didn't know that. What discipline? Because if it's not economics it has no bearing on this case and would be a classic example of the appeal to authority fallacy if I accepted his claims were true because of it.

As for the criticisms, they were of the wrong study which I accidentally posted which means the methodology and income theory part have no relevance to the actual study (and all that was said was "seems lax to me", just the false one. The others factors were admitted to be accounted for in the real study, except for the more experienced/less experienced workers which they didn't specifically mention so i'm not sure if that was accounted for. The only valid thing i've seen that has been said so far is that it hasn't make it out of peer review yet, which is understandable given it's only a month old but certainly a valid point.

So except for the criticism of the wrong study, there hasn't been any other evidence presented to counter the validity of mine. But when did I misquote? They only thing I quoted was the "These guys are taking guesses" one which I know wasn't misquoted. Unless you're talking about the false data thing, which doesn't seem to be misquoted since he does think it is wrong.

I'm perfectly willing to listen to evidence, but when none is presented and a mere declaration of wrongess is all that is asserted I can't agree with that.

 

Where did you misquote?

In post #4, T2 said "This was not a rigorous study of the data."

You, in the very next line, post #5, say: "The Political Economy Research Institute, in the University of Massachusetts, comes up with completely false data? You're gonna have to give me an argument for that one."

Emphasis mine. That isn't what T2 said, and he tried to point this out to you in post #11 (perhaps a little condescendingly, you're right - but whatever). He quite clearly said the study of the data was not rigorous. At no point did he say the data itself was false.

This means one of two things - either you read his response quickly and responded carelessly, or, perhaps here you're committing a classic example of the Straw Man fallacy, in arguing against an easily-refutable position you are ascribing to T2 but that he doesn't actually hold.

Subsequently, by questioning T2's scientific discipline and stating "if it's not economics it has no bearing on this case," you're committing a classic example of an ad hominem fallacy, by denigrating T2's credentials rather than the logical merits of his assertions.

Now do me a favor, would you? Quit trying to school us all on who's using which logical fallacy and where. For one thing, unless you're an expert on such things (and clearly you aren't) it doesn't do much for your credibility. For another, it's obnoxious enough when a tenured academic with a PhD does it - try to imagine how it's coming off when you do it.