Internet legends and economics

Lots of tall tales circulate on the internet, and it seems no area of human endeavours is safe from being distorted in order to fit some political-ideological agenda.

In a curious juxtaposition, on the same day that some comments that amount to (yet another) serious indictment of laissez-faire capitalism, a friend chose to post one of such tales, of a professor of economics that “proved” to his (it had to be a guy, obviously) class the “failure of socialism”.

First of all, it is a tale, documented by the internet hoax tracking site Snopes in this page: Social Injustice.

According to Snopes, one of the versions of this fable concludes stating that “Human nature will always cause socialism’s style of government to fail because the world has producers and non-producers (makers and takers).

Before we jump to conclusions about human nature, how about examining the very real consequences of policies that go in the direction preached by the aforementioned legend, shall we?

First of all, a series of charts from Mother Jones show the effects of decades of trickle-down economics in the US: It’s the Inequality, Stupid.

In a nutshell: “A huge share of the nation’s economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.“.

If, that’s not clear enough, consider this, from Business Insider: Sorry, Folks, Rich People Actually Don’t ‘Create The Jobs’. This, even more than the previous, lay bare the obvious ideological intent behind the made up story, as can be seen in this citation:

‘Rich people create the jobs.’
Specifically, by starting and directing America’s companies, entrepreneurs and rich investors create the jobs that sustain everyone else.
This statement is usually invoked to justify cutting taxes on entrepreneurs and investors. If only we reduce those taxes and regulations, the story goes, entrepreneurs and investors can be incented to build more companies and create more jobs.
This argument ignores the fact that taxes on entrepreneurs and investors are already historically low, even after this year’s modest increases. And it ignores the assertions of many investors and entrepreneurs (like me) that they would work just as hard to build companies even if taxes were higher.
But, more importantly, this argument perpetuates a myth that some well-off Americans use to justify today’s record inequality — the idea that rich people create the jobs.

To cap this commentary, the funny thing is that recently there was indeed a students’ revolt against an economics professor, but not quite in the way the legend describes: Harvard Students, Citing Economic Inequality, Stage Walkout. What the students actually said: “We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy [Wall
Street] movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice.

Going back to the legend that motivated this post, I wonder if this is the kind of bedtime story that the 1% tell to their children.

UPDATE: PZ Myers  throws  his hat into the ring – The United States is unsustainable. In his  words: “We are all supplementing banks so that they can screw over their employees at the bottom, and throw more of their cash to the owners at the top. The plutocrats want it both ways: they want a complete absence of regulation so they can continue to plunder profits, and they want poor, desperate people to do their labor for a pittance, with government aid.




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