Keynesianism is the True “Trickle-Down” Theory

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Keynesians and others are fond of claiming that free markets amount to a “trickle-down” theory in which it is supposed that as long as government does not intervene into consensual and peaceful exchange, the good results will “trickle down” from the wealthy to the less-wealthy. Yet, if you think of it, the real “trickle-down” theory is Keynesianism.

I say this because Keynesians believe that if the government gives huge amounts of money to politically-favored entities such as companies like Solyndra as well as firms that do road construction or even to state governments for them to give their public unions raises, then the good results will “trickle down” to the rest of us who do not receive these payments directly. My latest Krugman-in-Wonderland post deals with this point.

By the way, in a December 31 post, Paul Krugman attacks Bob Murphy and Murphy answers back. Stay tuned.

8:26 pm on January 1, 2013