Trickle-Down Economics

Economists, politicians, ideologues, and demagogues all love to disparage trickle-down economics. The phrase itself is pejorative. On the other hand, if someone says, “A rising tide lifts all boats,” we’re ok with that. Denotatively, they are saying the same thing; connotatively, they are expressing polar opposites.

Dispensing with the aquatic metaphors, the real issue here is the relationship between the health of the economy as a whole and the well-being of its individual members. We are still living in the shadow of Karl Marx. We like to pretend that economics is a zero sum game and that one player’s gain must come at the expense of other players’ losses.

But economics is not poker. The game has a wide range of possible outcomes in which the total wealth available for distribution is variable just as is each player’s share of that wealth.

For example, let’s assume we have an economy with just 10 participants. Our job is to divide the wealth in 10 ways. For the sake of the arithmetically challenged (me), let’s assume that the estimated total wealth is $55. We could just give every player 1/10th of the total. That’s socialism. Or we could give 9 players the minimum ($1) and direct all residual wealth ($46) to the one remaining participant. That’s robber baron capitalism.

Between these two extremes there are more than 8,000,000 possible ways to divide up a $55 pot so that every player receives a whole dollar amount (no pennies). To make matters worse, or better, there is no guarantee, indeed no likelihood, that the total pot will be the same under different distribution scenarios. 

Economies are organic. We believe that distribution impacts production. One distribution scheme will produce more aggregate wealth than another; we just can’t agree on which one gets us to the max! 

Experience has taught us that neither of the two extremes (socialism or robber baron capitalism) is likely to maximize the pot. We imagine that there is a sweet spot somewhere between these 2 extremes; finding that sweet spot is what keeps economists employed.

Not that ‘more’ should be the only criterion! Justice is at stake here as well. But once again, we don’t necessarily agree on what’s just. Is it ‘just’ that everyone gets the same regardless of their relative effort and contribution? Or is it ‘just’ that some players get only the ‘minimum’, even if their contribution is marginal? There’s a lot to consider.

One branch of economics concerns itself solely with production. What is the distribution formula best calculated to maximize production? Another branch looks at the social implications of the distribution scheme. What is the cost of strict meritocracy? We rely on professional economists to quantify our alternatives but we alone, acting through our chosen political representatives, can balance values to make the final decision.

Not sure? Need help? Let’s ‘phone a friend’. Does it matter that our friend is a fungus? 

Homo is not the only civilization on this planet. Single and multi-species ecosystems are all around us. The Serengeti has settled on a different distribution formula than the Mariana Trench. Each has worked out its own algorithm for maximizing production subject to its unique set of ‘ethical’ constraints.

Our forests (plants and fungi) offer a particularly successful example of a non-human economy. Vegetation covers most of the habitable zones on Earth. Absent human intervention, trees can live hundreds of years, fungi thousands. While forest life is not conflict free, sorry Snow White, it comes close. How does it work?

Fungus runs the show. The ‘wood-wide-web’ links trees of the same and different species in a resource and information sharing network. Are predator insects in the area? News travels from one end of the forest to the other, quickly and efficiently, so that trees can deploy their chemical armor.  

Are we in for a drought? Or a blizzard? The entire forest prepares together. Does a particular tree ‘look’ a bit peaked? The fungal network will divert water and life saving minerals to that member. If nature favors a particular tree with great height, exposure to sunlight, and a healthy root system, that tree will seek out opportunities to share its wealth, first to its ancestors and descendants, then to the entire forest.  

How come? Is fungus better than us? Maybe, but the forest has also run its own algorithms. It has determined that an unhealthy forest is an existential threat to even its most robust members. Likewise, every plant, every fungus is most likely to flourish in a healthy environment. Forests get what we often don’t – we’re all in this together!

Forests have turned ‘trickle-down’ economics, literally, into an art form. By sharing resources, trees ensure that the tide will raise all boats. Next time human society faces an economic dilemma it would do well to ask, “WWFD?” (What would the forest do?)

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