@Phronimos,
Phronimos wrote:The problem with trickle down economics, if you look at the Reagan years, is that all the growth went into the upper and middle sectors, whereas people living in poverty actually had their real wages decline. It's also somewhat ironic that you appealed to the Reagan era as a contrast to our current one with attitudes on greed, given that the 80s is largely considered a decade of opulence, where one of the mottos was 'greed is good.'
The problem we see during the Reagan years is systematic of all expansionist monetary policies, not just of the ideas behind "trickle-down" economics.
Expansionist monetary policies do not promote real wealth, they simply debase and devalue the currency.
While it is not very accurate, it is still conceptually useful to look at the whole of available money in an economy as representing the whole of consumable goods in the country. So one dollar's worth of goods would equate to 1/n*C where n is the total monetary supply and C is the total amount of consumable goods in the economy. So if there are ten dollars within the economy, one dollar represents one tenth of the total amount of consumable goods.
It is useful to look at prices and currency in this manner because it is a basic way of understanding prices as a
reaction to the monetary supply.
This reaction is never simultaneous with the cause either. Never is it true that monetary expansion results in everyone having added currency at a single point in time. This is what causes money to devalue over time as the money moves through the economy. When the money is issued, the first holder of money suddenly can purchase more goods at current market prices. This, in turn, ups the selling price of the good he purchased, as demand has increased. The first seller now turns around and purchases some other good or labor to increase production, or simply for consumption. This replicates the first step and prices continue their upward shift.
Now this money flow may, in effect, trickle down, but it is important to realize that, as it trickles down, the money loses value. While the final recipient of this flow down may see a nominal gain in wages, the prices of all goods have risen with it, lowering the purchasing power of the dollar, and effectively giving him no gain in real wage.