Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals

by Tyler Cowen

For instance, let’s assume, for the sake of argument, that the wealthy earn eight percent on their holdings, annually and on average, while the poor earn one percent. If one-fifth of the gains to the wealthy trickle down to the poor over time, then the poor are better off if the wealthy command more resources. They will receive one-fifth of the eight percent, or 1.6 percent, rather than the one percent they would earn on their own. Usually this trickle won’t reach them right away, but over time the rich will build more factories, buy more products, hire more domestic workers, fund more research and development, push for more immigration, and so on. Sooner or later, many among the poor will benefit. If we have a deep concern for the distant future, it matters less if most of these benefits come later.

The argument for trickle down approaches.