Trickle-up effect

The trickle-up effect or fountain effect is an economic theory used to describe the overall aggregate demand of households and middle-class people to drive and support the economy. The theory was founded by John Maynard Keynes (1883-1946).[1] It is sometimes referred as Keynesian economics in which stimulation is enhanced when the government lowers taxes on the middle class and increases government spending.[2]

Relationship to the trickle-down effect

Trickle-down economics is a rhetorical term used to criticise free market economics. No economist has ever supported trickle-down economics, which is the idea that giving the wealthy tax breaks will encourage them to spend more, and so this wealth will "trickle down" to the less wealthy.[3] In fact, free-market economics suggests that additional wealth will be created if businesses are less hampered by government controls or high taxation.[3]

The trickle-up effect states that benefiting the poor directly (for example through micro loans) will boost the productivity of society as a whole and thus those benefits will, in effect, "trickle up" to benefits for the wealthy.[4]

References

  1. ↑ http://www.businessdictionary.com/definition/demand-side-economics.html
  2. ↑ http://www.wisegeek.org/what-is-demand-side-economics.htm
  3. 1 2 "Why attack ‘trickle-down economics?’ It doesn’t exist – and never has done".
  4. ↑ Degnbol-Martinussen, John; Poul Engberg-Pedersen (2003). Aid. Zed Books. p. 21. ISBN 978-1-84277-039-9. Retrieved 2008-10-11.

See also


This article is issued from Wikipedia - version of the Friday, December 25, 2015. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.