Yesterday I learned … II

1) Yesterday, I learned that some love to hug, and they hug so long that it starts to feel weird. We can feel the message they want to convey. We know that they want to tell us that they’re fond of us, that they miss us, and that they want to strengthen the bond we once had, but in the midst of trying to create that moment, some overdo it. ‘Why are we still doing this?’ we ask ourselves while in the embrace. ‘Is this becoming more meaningful to them, or did they lose themselves in the moment? Would it be impolite if I started patting their shoulder here to signify that this is over for me? Why are we still hugging? They didn’t fall asleep did they?’

Today, I learned that a hug is not just a hug. For a greater portion of my life, the hug was largely indigenous to the female gender. We knew males who hugged. We called them “huggers”, as in, “Watch out for that one, he’s a hugger.” At some point, a shift started to happen. Suddenly, men were hugging each other to say hello, to celebrate their favorite team’s touchdown, and to say goodbye. No one knows when this shift started, but I blame the NBA. We teenagers could distance ourselves and mock the huggers we knew, but NBA stars were the essence of cool in the late 80’s-early 90’s. When they hugged, it took an arrow out of our quiver. For these NBA players, a hug was nothing more than a physical form of saying hello. It was a step above a wave or a handshake, but to us, it was a deep and meaningful physical embrace. We didn’t have anything deep and meaningful to convey to our friends. Others did, and they appreciated the NBA influence. They took these “hello” hugs to another level.

“We’re cousins,” huggers would say. “Cousins don’t shake hands. Cousins hug. Get in here bro.” Some of them even embraced us when it hadn’t been that long since our last hug. Their hugs were so deep and meaningful that they thwarted our attempts to break free. Their hugs bordered on combative. “I think the world of you bra.” We non-emotional, non-huggers learned to adapt to the need others have to hug, but we never fully embraced it, and they could feel it. They adapted to our adaptation. “All right, I won’t hug ya’,” they would say, and they stopped, and we sighed in relief, until we were the only ones they didn’t hug. We never wanted back in, but we recognized the strange way abstinence makes the heart grow fonder.

2) Yesterday I learned that “a little after three” can mean 3:23. In what world is 3:23 a little after three? When I hear a little after three, I think 3:01-3:10. Anything after that should be a little more vague, such as “after three”. The next time block, the 3:23 time block, should list at “around three-thirty”. Today, I learned that we become more aware of time constraints and the relative definition of time blocks when a six-year-old is tugging at our sleeve.    

3) Yesterday, I learned that pop culture defines deviancy upward by defining any actions a criminal uses to evade law enforcement as those of a criminal mastermind. True crime authors characterize actions such as wiping fingerprints off door handles as brilliant. When compared to most impulsive, criminal acts, perhaps it’s worth noting when a criminal puts some thought into their criminal activity, but I’m not sure if I would call them brilliant criminal masterminds. If we take a step back from our desire to view them as brilliant, we might see that their methods are relatively mundane, based on information available to anyone with a TV and access to the internet. Today, I learned that criminals don’t want to get caught. They want to be free, and they want to be free to continue to hurt, maim, and kill as many people as they can. The Unabomber, for example, enjoyed the characterization of a secluded genius with a cause, but court documents of his trial reveal that he was “often unconcerned” with his targets. They reveal that he was meticulous about the construction of his bombs, and he went to great lengths to avoid capture, but he didn’t really care who the victim was as long as he maimed or killed someone. He basically wanted to shower in whatever rained down upon him in his elaborate fireworks show.    

4) Yesterday, I learned that criminal masterminds need a cause to justify their actions. They might not be able to justify their actions to anyone but themselves, but they do seek the satisfaction a cause provides. No self-respecting criminal mastermind would say that they did it, because they enjoy hurting, maiming, and killing people. That would diminish their value, their self-esteem, and their historic value. Today I learned that criminal psychologists say that we learn more from their initial crimes than those that follow, because impulses drive those initial crimes. If this is true, we find that most criminal masterminds are petty people who resolve internal and external, disputes in a violent manner. They also have a bloodlust, and as this bloodlust escalates the need for a cause escalates, until they slap a sticker on their actions to satisfy those questions we have about why they did it. It strikes me that everything these criminal masterminds say is window dressing to conceal their simple, primal bloodlust. They want to put a cause on it, because we want the cause. It wouldn’t be very satisfying, or entertaining, if a mass murderer, or serial killer said, “I just had some basic psychological, primal need to hear people scream.” No matter how many causes we assign to people hurting people, the simple truth is that some of us enjoy hurting people, and the rest of us enjoy reading and watching everything we can about it.

5) Yesterday, I learned that bad boys fascinate all of us. The only reason it’s noteworthy that bad boys fascinate women is that it goes against stereotype. Some of us want to know more about them than otherwise peaceful, normal individuals who accomplish great things. On a corresponding scale, too many of us want to know about the minutiae of the Unabomber’s actions, the motivations, and the aftermath of his terror, and too few of us, by comparison, are as fascinated by the actions and motivations behind Leonardo da Vinci’s artistic output. We label them both brilliant in their own, decidedly different ways, but the Unabomber fascinates us more. Today, I learned that I’m no different. Most of the people who fascinated me in my youth had violent tendencies. Some of my friends in high school, and some of my parents’ friends had violent tendencies on a much lower scale of course, but they fascinated me. I found their ways hilarious and engaging. Is this human nature, or do some elements of our culture encourage this mindset? Most of our favorite critically acclaimed movies have something to do with some low life committing violent acts. When someone found out that I listed the simple, feel good movie Forrest Gump among my favorite movies, they asked, “Why?” with a look of disdain. When I told her that I thought it was a great story, that didn’t help my cause. When I told her all of the others I had one my list that mollified her, but she still couldn’t understand why I would list a feel good movie like Gump among them. Today, I learned that the fascination with violence is universal and cool. 

6) Yesterday, I learned that I’m no longer interested in writing about politics. Today, I realized that I am far more interested in the psychology behind why every day citizens decide to become so political that they’re willing to create a divide between those who think like them and those who don’t.

7) Yesterday, I learned that psychologists state that we have a “God spot” in our brain. Today, I realized that this spot is inherently sensitive to the belief in something, if the rational brain accepts the rationale for doing so. This view suggests that the brain needs belief in a manner similar to the stomach needing food. We seek explanations and answers to that which surround us. Some of us find our answers in God and religion and others believe answers lie in a more secular philosophy, and the politicians who align themselves with our philosophy. They seek a passionate pursuit of all things political, until it becomes their passion, because they need something to believe in.   

8) Yesterday, I learned that there were as many differing opinions about Calvin Coolidge, in his day, as there are our current presidents. Today, I realized that no one cares about the opinions opinion makers had 100 years ago, and few will care about what our current opinion makers write 100 years from now. Some of those writers passionately disagreed with some of Coolidge’s successes, and history exposed some of their ideas as foolish. The historical perspective also makes those who passionately agreed with Coolidge seem boring and redundant. Once a truth emerges, in other words, it doesn’t matter what an opinion maker thought of the legislation at the time. Most opinion writers are less concerned with whether legislation proves effective or not, and more concerned with whether their philosophical views win out. In one hundred years, few will remember if our political, philosophical, or cultural views were correct or not, and even fewer will care. Yet, some of us believe in politics, because politics gives us something to believe in.

9) Yesterday, I learned that Tim Cook is an incredible, conventional CEO of Apple. Former Apple CEO, Steve Jobs, was the company’s incredible, unconventional leader, and he helped build the company from scratch. Steve Jobs was a brilliant orator, a showman, a marketer, and a great motivator of talent. If we went to an It’s a Wonderful Life timeline, in which Steve Jobs never existed, Apple wouldn’t exist. I had a 200-word list of superlatives describing Steve Jobs, but I decided to delete it, because it didn’t add any new information we know about the man and what he did. I decided to leave it at those two sentences. Better, superlative descriptions of the man, and what he did, are all over the internet. Walter Isaacson’s book might be the best of them. Steve Jobs and Steve Wozniak created and oversaw a team of talent that created the most innovative company of our most innovative era of America, but Tim Cook has proven to be an incredible steward of that technology. If we flipped the timeline around, and Tim Cook was the first CEO, Apple wouldn’t be the innovator it is today, but I wonder if the less conventional and more mercurial measures Jobs employed would translate to the same consistent levels of growth of Apple we see today under Cook.    

10) Yesterday, I learned that Apple’s stock was ready to fall. Anyone who reads independent analyses from stock market analysts thinks that not only is the smartphone market capped out, but Apple’s position atop this industry is also nearing an end. Reading through some of the analysis of Apple’s projections for their various quarterly reports through the years, we arrive at some common themes. “There’s no way the iPhone (insert number here) can deliver on the projected sales figures Apple is promising,” they write. “Everyone who wants an iPhone already owns one, and numbers show they’re not going to upgrade. Those who don’t want an iPhone are loyal to another brand. The market is saturated, and Apple’s reign is about to end.” Today, I learned these analysts began making such predictions years after Apple began controlling the market between 2008 and 2012. Some of the times they were right, in the sense that Apple missed some quarterly projections, but most of the time they were wrong. Some think that there might be an anti-Apple bias, and there might be, but I think it’s human nature to cheer on the little guy and despise the big guy. I also think analysts/writers want us to read their articles, and the best way they’ve found to do so is to feed into our love of doom and gloom. These stories have a natural appeal to anyone who owns Apple products, Apple shareholders, and everyone else in between, because we love the prospect of the leaning tower. Apple will fall too, for what goes up must come down, particularly in the stock market, but the question of when should apply here. After it falls, one of the doomsayers will say, “I’ve been predicting this would happen for years.”

“Fair enough, but how many times did you make this prediction? How many times were you wrong? How many times did a reader act on your assessment and miss some gains? Nobody asks the doomsayer analysts these questions, because most of us don’t call doomsayers out when they’re wrong. The answer to this question was that on 2/3/2010, Apple stock closed at 28.60 a share, adjusted for dividends and stock splits, per Yahoo Finance. If one of the doomsayer analyst’s customers purchased 35 shares for a total investment of $1,001.00 that investment would be worth $11,170.60 on 2/4/2020. Anyone who invests in the stock market relies on expert analysis to know when to buy and when to sell. We consider the positive assessments and the negative, and some of the times, it takes an iron stomach to read the negative and ignore it. These negative stock analysts had all the information the others had, and yet they consistently predicted Apple would fall, because they knew a negative headline would generate a lot more hits than a positive one.

In our scenario, Apple experiences a significant fall in stock price, and the analyst finally proved prophetic. How many times were they wrong in the interim? It doesn’t matter, because a doomsayer need only be right once, for they can then become the subject of email blasts that state, “The man who correctly predicted Apple’s downfall, now predicts the fall of another behemoth.” The penalties for incorrectly predicting doom and gloom are far less severe than incorrectly predicting good times ahead. The former doesn’t cost you anything except potential gains, which most people inherently blame on themselves, regardless what anyone says. There’s the key, the nut of it all, an analyst can predict doom and gloom all day long, and no one will blame them for trying to warn us, but a positive analysis that is incorrect could cost us money.

The prospect of investing our hard-earned money in something as mercurial as the stock market is frightening. We’ve all heard tales of the various crashes that occur, and we know it will occur again. Most of us need Sherpas to guide us through this dangerous, dark, and wild terrain, and most of them are quite knowledgeable and capable. There are a few who will tell you that it’s so dangerous that you should get out now, and some might even tell us that it’s so dangerous that we shouldn’t even consider making the journey. Those with an iron stomach will tell us that we can get rich working for money, but we can get filthy, stinking rich when our money is working for us.  

Historical Inevitability

The idea that history is cyclical has been put forth by numerous historians, philosophers, and fiction writers, but one Italian philosopher, named Giovanni Battista Vico (1668-1744), wrote that a fall is also an historical inevitability. In his book La Scienza Nuova, Vico suggested that evidence of this can be found by reading history from the vantage point of the cyclical process of the rise-fall-rise, or fall-rise-fall recurrences, as opposed to studying it in a straight line, dictated by the years in which events occurred. By studying history in this manner, Vico suggested, the perspective of one’s sense of modernity is removed and these cycles of historical inevitability are revealed.

To those of us who have been privy to the lofty altitude of the information age, this notion seems impossible to the point of being implausible. If we are willing to cede to the probability of a fall, as it portends to a certain historical inevitability, we should only do so in a manner that suggests that if there were a fall, it would be defined relative to the baseline of our modern advancements. To these people, an asterisk may be necessary in any discussion of cultures rising and falling in historical cycles. This asterisk would require a footnote that suggests that all eras have creators lining the top of their era’s hierarchy, and those that feed upon their creations at the bottom. The headline grabbing accomplishments of these creators might then define an era, in an historical sense, to suggest that the people of that era were advancing, but were the bottom feeders advancing on parallel lines? Or, is it possible that the creators’ accomplishments might, in some way, inhibit their advancement?

“(Chuck Klosterman) suggests that the internet is fundamentally altering the way we intellectually interact with the past because it merges the past and present into one collective intelligence, and that it’s amplifying our confidence in our beliefs by (a) making it seem like we’ve always believed what we believe and (b) giving us an endless supply of evidence in support of whatever we believe. Chuck Klosterman suggests that since we can always find information to prove our points, we lack the humility necessary to prudently assess the world around us. And with technological advances increasing the rate of change, the future will arrive much faster, making the questions he poses more relevant.” –Will Sullivan on Chuck Klosterman

My initial interpretation of this quote was that it sounded like a bunch of gobbeldy gook, until I reread it and plugged the changes of the day into it. The person that works for a small, upstart company pays acute attention to their inbox, for the procedures and methods of operation change by the day. Those of us who have worked for a larger company, on the other hand, know that change is a long, slow, and often grueling process. It’s the difference between changing the direction of a kayak and a battleship. 

The transformational changes we have experienced in technology, in the last ten years, could be said to fill a battleship, occurring with the rapidity of a kayak’s change of direction.  If that is true, how do we adapt to them at such a breakneck pace? Those 40 and older can adapt to change, and we incorporate those changes into our daily lives at a slower pace. Teens and early twenty somethings are quicker and more eager to adapt and incorporate the latest and greatest advancements, regardless the unforeseen, and unintended consequences.

Some have suggested that if the technological changes we have encountered over the last 10 years occurred over the course of 100 years, we might characterize that century as one of rapid change. Is it possible for us to change as quickly, fundamentally, or is there some methodical lag time that we all factor in?

If we change our minds on an issue as quickly as Klosterman suggests, with the aid of our new information resources, are we prudently assessing these changes in a manner that allows us to examine and process unforeseen and unintended consequences before making a change? How does rapid adaption to technological change affect human nature? Does it change as quickly, and does human nature change as a matter of course, or does human nature require a more methodical hand?

These rapid changes, and our adaptation to them, reminds me of the catch phrase mentality. When one hears a particularly catchy, or funny, catchphrase, they begin repeating it. When another asks that person where they first heard that catchphrase, the person that now uses the catchphrase so often now that it has become routine, say they don’t remember where they heard it. Even if they began using it less than a month ago, they believe they’ve always been saying it. They subconsciously adapted to it and altered their memory in such a way that suits them.  

Another way of interpreting this quote is that with all of this information at our fingertips, the immediate information we receive on a topic, in our internet searches, loses value. One could say as much with any research, but in past such research required greater effort on the part of the curious. For today’s consumer of knowledge, just about every piece of information we can imagine is at our fingertips. 

Who is widely considered the primary writer of the Constitution, for example? A simple Google search will produce a name: James Madison. Who was James Madison, and what were his influences in regard to the document called The Constitution? What was the primary purpose of this finely crafted document that assisted in providing Americans near unprecedented freedom from government tyranny, and rights that were nearly unprecedented when coupled with amendments in the Bill of Rights. How much blood and treasure was spent to pave the way for the creation of this document, and how many voices were instrumental in the Convention that crafted and created this influential document?

Being able to punch these questions into a smart phone, and receive the names of those involved can give them a static quality. The names James Madison, Gouvernor Morris, Alexander Hamilton, and all of the other delegates of the Constitutional Convention that shaped, crafted, and created this document could become nothing more than answer to a Google search. Over time, and through repeated searches, a Google searcher could accidentally begin to assign a certain historical inevitability to the accomplishments of these otherwise disembodied answers. The notion being that if these answers aren’t the correct answers, another one could be.

Removing my personal opinion that Madison, Morris, Hamilton, and those at the Constitutional Convention the composed the document, for just a moment, the question has to be asked, could the creation of Americans’ rights and liberties have occurred at any time, with any men or women in the history of our Republic? The only answer, as I see it, involves another question: How many politicians in the history of the world would vote to limit the power they wield, and any future power they might attain through future endeavors? How many current politicians, for example, are likely to vote for their own term-limits? Only politicians who have spent half their life under what they considered tyrannical rule would fashion a document that could result in their own limitations.   

How many great historical achievements, and people, have been lost to this idea of historical inevitability? Was it an historical inevitability that America would gain her freedom from Britain? Was the idea that most first world people would have the right to speak out against their government, vote, and thus have some degree of self-governance inevitable? How many of the freedoms, opportunities, and other aspects of American exceptionalism crafted in the founding documents are now viewed as so inevitable that someone, somewhere would’ve come along and figured out how to make that possible? Furthermore, if one views such actions as inevitable, how much value do they attach to the ideas, and ideals, created by them? If the answers to these questions attain a certain static inevitability, how susceptible are they to condemnation? If an internet searcher has a loose grasp of the comprehensive nature of what these men did, and the import of these ideas on the current era, will it become an historical inevitability that they’re taken away in a manner that might initiate philosopher Vico’s theory on the cyclical inevitability of a fall?

I’ve heard it theorized that for every 600,000 people born, one will be a transcendent genius. I heard this quote secondhand, and the person who said it attributed it to Voltaire, but I’ve never been able to properly source it. The quote does provide a provocative idea, however, that I interpret to mean that the difference between one that achieves the stature of genius on a standardized test, or Intelligence Quotient (IQ) test, and the transcendent genius lies in this area of application. We’ve all met extremely intelligent people in the course of our lives, in other words, and some of us have met others who qualify as geniuses, but how many of them figured out a way to apply that abundant intelligence in a productive manner? This, I believe, is the difference between the 1 in 57 ratio that some have asserted is the genius ratio and the 1 in 600,000 born. The implicit suggestion of this idea is that every dilemma, or tragedy, is waiting for a transcendent genius to come along and fix it. These are all theories of course, but it does beg the question of what happens to the other 599,999 that feed off the ingenious creations and thoughts of transcendent geniuses for too long? It also begs the question that if the Italian philosopher Vico’s theories on the cyclical nature of history hold true, and modern man is susceptible to a great fall, will there be a transcendent genius who is able to fix the dilemmas and tragedies that await the victims of the next great fall? 

Trickle-Down Economics or Trickle-Down Government?

““Trickle-down economics”, also referred to as “trickle-down theory”, is a populist political term used to characterize economic policies as favoring the wealthy or privileged.” –Google definition.

I appreciate the idea that one of the primary duties of a search engine is to provide concise definitions for their customers. So, I do not fault Google for providing what I consider an incomplete definition. To my mind the ideal definition of the term would be the following: ‘Trickle-down economics’, also referred to as ‘trickle-down theory’, is a populist political term used (primarily by opponents) to characterize economic policies (with which they disagree) as favoring the wealthy or privileged.’ (Those who helped to write the definition of the term, for Wikipediahave included the first (primarily by opponents) parenthetical addition.)

(Credit: Center for Media and Democracy)

I realize that, in some ways, these additions might result in the perception that the search engine is taking a side in the argument, but as economist, Dr. Thomas Sowell, writes in his book Basic Economics, the term “trickle-down” is not a proper characterization of the laissez-faire, supply-side economists view that favors freeing up markets. Their goal, attained through a lowering of regulations on business, a lower capital gains tax, and a lower corporate tax rate, would not provide benefit specific to the wealthy or privileged, as much as it would all enterprising risk takers, regardless of their income.

One of the biggest myths that those overwhelmed by the intricacies and complexities involved in understanding economic theory buy into is that an increased tax rate always leads to more revenue for the government. It seems like simple math to suggest that if the government taxes a corporation one percent on 100 million of their profit, the government will receive one million dollars, two percent equals two million, and the higher the tax rate the more a government receives to then redistribute accordingly. This is what supply side economist Arthur Laffer has characterized as an “arithmetic effect”.

What the arithmetic effect does not account for is the effect high taxes have on the amount of taxable activity that occurs. Economist Arthur Laffer points out that everyone knows that if you tax a corporation 0%, the government will receive 0% in revenue. What may not seem as logical on the face of it is, if the government taxes a corporation 100%, the government will also receive 0% in revenue, because the taxed individual, or corporation, will begin to lessen their activity to avoid greater taxation.

What this illustrates, by means of exaggeration, is that there are points in between at which companies, and individuals, decide that it doesn’t make good business sense to continue to engage in taxable activity, at full capacity, if the tax rate on that activity is too high. There is a point in between, suggests Laffer, a point that some now call the Laffer Curve, that suggests that there is a sweet spot in the tax rate that encourages more taxable activity, broadens the tax base by encouraging greater employment, and can end up resulting in greater revenue for the federal government.

If the supply-side argument were solely concerned with a “trickle-down” effect, one would think that they would be obsessed with the rich keeping more of their money. If that were the case, the supply-side argument might suggest that the tax rate should be as low as possible. They might even suggest that the tax rate should be 0%, or a single-digit tax-rate. That is not the argument that Laffer, Sowell, or any supply-side economists put forth. Rather, they call for a tax rate that encourages greater economic activity that they believe will result in more taxable activity that they believe should result in more revenue for the government. If they directed their sole focus at the rich keeping more of their money, their arguments would also focus more on the federal income tax rate. What they are more concerned with is lowering the corporate tax rate, the capital gains tax, and lessening burdensome government regulation to allow for a more stratified economy by encouraging more middle class investment and risk taking. The middle class risk takers comprise a large percentage of employers of our society, and most of them are not successful in their efforts, much less wealthy. The politicians that raise these taxes often talk about how they need to create jobs, but if the supply side economist theories are to be accepted, these politicians do more harm than good to those that employ when they tax beyond the sweet spot.

Warren Buffett and the Already Wealthy

Ask any wealthy, or privileged, individual about paying taxes, and they will inform the inquisitive that they don’t mind paying taxes, that they’re not paying enough in taxes, or that they think they should be paying more. The listener cannot help but consider such an answer to be wonderful, altruistic, and patriotic. What Warren Buffett will not add is that paying more in taxes will not hurt him, because he already has his money, and he doesn’t mind paying as many taxes as he could possibly pay, until the IRS tries to collect those taxes, and Warren Buffet takes them to court and succeeds in keeping more of his millions.

A person like Warren Buffett may have been for lower taxes, decreased regulations, and a lessened role of government in the economy when he was starting out, but it no longer benefits him in the manner it may the enterprising risk taker that deigns to compete with one of the blue chip companies in which Warren Buffett owns stock. The already wealthy and privileged few –like Warren Buffett– would be more apt to encourage federal regulators to regulate and tax the industries of the companies from which he has shares. In doing so, a wealthy and privileged type like Warren Buffet hopes the government can help him diminish current competitors and drive away any future risk takers that might aspire to compete with a Wells Fargo, IBM, Coca Cola, or any of the other big, blue chip companies in which he owns shares. Yet, any time Warren Buffet appears on TV, everyone is surprised to hear him sound more like Barack Obama than Ronald Reagan did. Why wouldn’t he, it benefits him to do this, and he already has his.

The Straw Man Argument

Some trace the term “trickle-down economics” to the humorist, Will Rogers, and his attempts to demonize the policies of President Herbert Hoover for the benefit of the Franklin D. Roosevelt campaign. Those, in certain circles, use the term now to voice opposition to such theories, as a straw man argument of what the other side believes. 

As Thomas Sowell writes in his book Basic Economics:

“No recognized economist of any school of thought has ever had any such theory (Trickle Down) or made any such proposal. It is a straw man. It cannot be found in even the most voluminous and learned histories of economic theories.

“What is sought by those that advocate lower rates of taxation or other reductions of government’s role in the economy is not the transfer of existing wealth to higher income earners or businesses but the creation of additional wealth when businesses are less hampered by government controls or by increasing government appropriation of that additional wealth under steeply progressive taxation laws. Whatever the merits or demerits of this view, this is the argument that is made – and which is not confronted, but evaded, by talk of a non-existent ‘trickle down’ theory.

“Whether in the United States or in India, and whether in the past or in the present, ‘trickle down’ has been a characterization and rejection of what somebody else supposedly believed. Moreover, it has been considered unnecessary (by opponents) to cite any given person who had actually advocated any such thing.

“The real effect of a reduction in the capital gains tax is that it opens the prospect of greater future net profits and thereby provides incentives to make current investments that create current employment.”

If one were to corner me in a supermarket and ask me about supply side economics, based on the curve that Arthur Laffer reintroduced to the world, that opponents call trickle-down economics, I might have conceded to the idea that those that formed the economic theory intended it to favor the wealthy and industrial types first. I believed that those who espouse the theory state intend for the fruits of this process to pinball its way down. Even back then, back when I thought it was a decent theory on its face, I didn’t think it made sense. How does one answer for the argument that in a trickle down economy, the idea of greed counters the idea that the money will ever find its way to the worker.

The answer is that our economy is more stratified, and a stratified economy calls for the success of the businesses across all classes, and when the government steps in with its invisible hand to determine winners and losers, it messes up that dynamic by crushing the little guys first. Thomas Sowell would say that even that is a fundamental misreading of the manner in which economic processes work.

“Economic processes work in the directly opposite way from that depicted by those that imagine that profits first benefit business owners and that benefits only belatedly trickle down to workers.

“When an investment is made, whether to build a railroad or to open a new restaurant, the first money is spent hiring people to do the work. Without that, nothing happens. Even when one person decides to operate a store or hamburger stand without employees, that person must first pay somebody to deliver the goods that are being sold. Money goes out first to pay expenses and then comes back as profits later – if at all. The high rate of failure of new businesses makes painfully clear that there is nothing inevitable about the money coming back.

“Even with successful and well-established businesses, years may elapse between the initial investment and the return of earnings. From the time when an oil company begins spending money to explore for petroleum to the time when the first gasoline resulting from that exploration comes out of a pump at a filling station, a decade may have passed. In the meantime, all sorts of employees have been paid – geologists, engineers, refinery workers, and truck drivers, for example. It is only afterwards that profits begin coming in. Only then are there any capital gains to tax. The real effect of a reduction in the capital gains tax is that it opens the prospect of greater future net profits and thereby provides incentives to make current investments that create current employment.”

The ignorance of the many (myself included) of the complications inherent in economic theory allows opponents of economic theories to frame and fragment that them in such a way that they are able to reduce it to a misleading soundbite that trashes Trickle-down economics. I do not think I’m alone when I write that even though Dr. Sowell has a talent for making the complex understandable, the quotes I’ve provided here lead to  irritable cerebral digestion for which rereading is the only cure. In the midst of such confusion, opponents step in to provide relief from this confusion, and arduous reading, by giving us a ‘benefit the wealthy and privileged’ soundbite.

The Big Corporation and Big Government Relationship

One of the methods novices can use to try and understand a complex economic theory, such as that espoused by Dr. Sowell and others, is to understand what it is not. What is the opposite of lessened regulations, and lower business specific taxes? Some call it Keynesianism economics. Keynesian economists often call for government intervention in times of crisis (i.e. recession or depression). Keynesians often call for “work ready jobs”, and what others call “shovel ready jobs”. Opponents characterize these jobs as one group of employees digging a hole, while another group covers that hole. The short-term purpose of such jobs is to get us over the short-term, temporary, bump of a failing economy. The problem that results from these temporary, short-term resolutions is that when government establishes a role in the economy, for emergency purposes, it rarely rolls those temporary measures back when the emergency has been resolved, as most politicians will not concede that an emergency, which voters elect them to fix, is ever resolved.

This ends up establishing a greater, and more accepted involvement of the government in the economy. Big Corporations hire accountants and lawyers to teach them how to survive in an environment of a burdensome federal government, until a mutually beneficial relationship is established. The mutually beneficial relationship is realized when Big Corporations learn how to not only survive, but thrive in such an environment, until an incestuous relationship develops to create a climate some call crony capitalism. Some may find this hard to believe, but Warren Buffett, his blue chip companies, and all of those listed in the Dow actually favor more regulations, higher corporate tax rates, higher capital gains rates, and a larger role of federal government in their respective industry.

‘Why would a Big, greedy Corporation call for more taxes, more regulations, and more complications within their own industry?’ some might ask. ‘Doesn’t that affect their profit margin?’ The answer lies in fine print of the reason that there are now more millionaires in Washington D.C., per capita, than in any other place in the United States. It is also the answer to the question how an indicator of the health of an economy, such as the Gross Domestic Product (GDP), can continue to grow at an anemic rate while the stock market soars to record levels. Crony capitalism results in Big Corporations (and their lobbyists) joining hands with government officials (and their agencies) to pass onerous regulations and high corporate tax rates on an industry. The result is that the rich companies in that industry get richer and the poor get poorer, and this creates a truer form of what could more appropriately call trickle-down economics with the government and Big Corporations holding hands at the top.

When the Food and Drug Administration (FDA) recently passed regulations on E-Cigarettes, or Vapor cigarettes, for example, they did so in a manner that should have shocked those who loathe corporate America and favor regulating Big Corporate America in a way that they believe, somehow, benefits everyone else. The FDA regulations actually ended up favoring the Big Three Corporations in the smoking industry, or those that have the means, and the set aside money, to comply with all of the FDA regulations and the resultant applications. The Little Guys who attempted to establish brand names in the industry, and carve out their own niche in the industry, will eventually be unable to afford these expenses and still turn a profit on the product, so the Big Three will be the only ones left that can afford to sell and distribute E-Cigarettes and Vapor cigarettes. Why would these Big Three corporations do this, if they are already in the E-Cigarettes segment of the market, but not dominating it yet, or if they are not already in the market, but they have plans to be? They were utilizing Big Government regulation and taxation to crush the little guys in their industry. The very definition of what some politicos call crony capitalism.

Some may say that the FDA’s regulations in the E-Cigarette, or Vapor cigarette, industry may have inadvertently helped the Big Three in their plans to dominate this segment of the industry. They would add, however, that the primary goal of the FDA was to help the consumer understand that E-cigarettes and Vapor cigarettes either contain toxins that are harmful to their health, or that the companies in the industry must prove that they don’t, and they must warn the public if they can’t. In the case of this particular FDA regulation, however, Michael Siegel writes that there were alternatives to protect the consumer in the ways the FDA stated that these regulations would, but that the FDA chose the route most beneficial for the Big Three. One could deduce, based on the particulars of the regulations listed in Siegel’s piece that the FDA acted in a manner that the Big Three’s lobbyists called for, as these regulations helped the Big Three crush the little guys in the segment in such a manner that will leave the Big Three as the sole competitors.

Long story short, a bunch of little guys gathered and carved out a niche in an industry that the Big Three had some difficulty dominating. The Big Three grew weary of the competition in that industry, and they “secretly negotiated” with advocacy groups and lobbyists to help form the legislation. 

As a spokesman of Altria, the biggest of the Big Three, Brian May, stated: 

“(Altria) did support FDA extension of authority over e-cigarettes and other tobacco products. Our goal is to be a leader in vaping space.”

“In terms of what they’re trying to do, (tobacco companies) want to limit competition and encourage the cartelization of their markets,” Jonathon H. Adler, the author of the “Baptists, Bootleggers” article, wrote in an email. “They want regulation of e-cigarettes because it lessens the competitive threat to traditional cigarettes and because it makes the remaining e-cigarette market something that’s easier for them to dominate.”

Some are also suggesting that the manner in which the Big Three in this industry conspired with the government to take over the E-cigarette segment of the business, lays a road map for how they will take over the marijuana industry if that product achieves legalization in the United States.

So the next time a powerful politician suggests that “trickle-down economics” does not work, remember that is in their best interests to re-characterize the supply-side economic theory, without informing their audience of the particulars of that theory. Also, keep in mind that if their theory on economics continues to prevail, the government will remain atop the various industries in this country. The politician will be in a seat of power that will continue to allow that politician to “trickle-down” benefits in all the ways listed above, and in the form of taxpayer subsidies, bailouts, and no-bid contracts that benefit the corporations that meet the politician’s political bullet points.

Also, remember if supply-side economists had their way with the government’s economic policies, the regulations and tax code would have appeal that is more comprehensive for those individuals (little guys) that aspire to take a risk in our economy. The intended result would be greater prosperity among all economic classes. The method of doing so would involve removing the roadblocks that Big Corporations hire accountants and lawyers to help them avoid. The intended result would also involve freeing up of middle class risk takers in a manner than should result in a broader tax base, more diverse forms of employment for individuals across economic classes, and it should end up resulting in more money in the coffers of government.

The opponents have learned, however, that the best way to pettifog an issue is to get out in front of it, and proactively define the debate in question. When a person defends their personal motivations on an issue by saying it’s not about the money, the first thing the listener knows is that it’s all about the money. On a similar note, when a politician allocates tax payer’s hard earned dollars –in the form of tax payer subsidies– to one company in an industry, and they say it’s not about picking winners and losers, the listener can be assured that it’s all about picking winners and losers. That particular company just managed to hit most of the politician’s political bullet points, and he or she began transferring wealth to the company in a form of trickle-down economics in which the politician was standing alone at the top of the pyramid flexing their muscles for the rest of corporate America to witness.

I don’t know what the goals of other side of supply-side economics were hoping to accomplish in their end game, but I would guess that most honest businessmen now find it disgusting to watch their fellow businessmen panhandle government officials into drowning their competition in legal red tape, onerous regulations, and tax rates. I would think that most honest businessmen would, at least consider the practice unethical. I’m quite sure that the other businessmen –those declared to be unethical by their peers– would turn to their friends and say something along the lines of, ‘To succeed in this climate, you need to learn how to operate within it. It’s called crony capitalism.’