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ryao 7 days ago

> there is no empirical evidence for trickle down economy

I usually avoid responding to remarks like this because they risk forays into politics, which I avoid, but the temptation to ask was too great here. What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? The first ones had outrageous prices that only the exorbitantly wealthy could afford. Now almost everyone in the US has them. They seem to have trickled down to me.

usrbinbash 7 days ago | parent | next [-]

> What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be?

Products people buy with the money they earn. Not things that fall down from the tables of the ultra rich.

Their affordability comes from the economies of scale. If I can sell 100000 units of something as opposed to 100 units, the cost-per-unit goes down. Again, nothing to do with anything "trickling down".

ryao 7 days ago | parent [-]

R&D was required not only to create initial versions, but also to increase scale. If the money had not been there for all of that, how would the affordable versions exist today?

rTX5CMRXIfFG 7 days ago | parent | next [-]

The money for RND exists because capital markets exist, not because of “trickle-down economics”. Capital markets exist by pooling in the savings even by poor and middle class households. You can argue that the vast majority of savings used to fuel tech and innovation come from the upper classes, but then where’s your trickle-down economics there?

ryao 7 days ago | parent [-]

Your question was answered above:

> What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? The first ones had outrageous prices that only the exorbitantly wealthy could afford. Now almost everyone in the US has them. They seem to have trickled down to me.

rTX5CMRXIfFG 6 days ago | parent [-]

Eh, whatever. That’s not a direct answer explaining what and where exactly is trickle-down economics in that phenomenon. At best, you’re just arguing off a fallacy: that because B happened after A, then A must have necessarily caused B.

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ryao 6 days ago | parent | prev [-]

I do not think that fits “If the money had not been there for all of that, how would the affordable versions exist today?”, but let’s agree to disagree.

That said, I see numerous things that exist solely because those with money funded R&D. Your capital markets theory for how the R&D was funded makes no sense because banks will not give loans for R&D. If any R&D funds came from capital markets, it was by using existing property as collateral. Funds for R&D typically come from profitable businesses and venture capitalists. Howard Hughes for example, obtained substantial funds for R&D from the Hughes Tool Company.

Just to name how the R&D for some things was funded:

- Microwave oven: Developed by Raytheon, using profits from work for the US military

- PC: Developed by IBM using profits from selling business equipment.

- Cellular phone: Developed by Motorola using profits from selling radio components.

- Air conditioner: Developed by Willis Carrier at Buffalo Forge Company using profits from the sale of blacksmith forges.

- Flat panel TV: Developed by Epson using profits from printers.

The capital markets are no where to be seen. I am at a startup where hardware is developed. Not a single cent that went into R&D or the business as a whole came from capital markets. My understanding is that the money came from an angel investor and income from early adopters. A hardware patent that had given people the idea for the business came from research in academia, and how that was funded is unknown to me, although I would not be surprised if it had been funded through a NSF grant. The business has been run on a shoe string budget and could grow much quicker with an injection of funding, yet the capital markets will not touch it.

rTX5CMRXIfFG 6 days ago | parent [-]

I don’t think you even understand what capital markets are. That entire litany about banks isn’t even remotely close to how loans are applied for and granted—-but to address your anecdata more directly: Where do you think VCs are getting their money? You’ve never heard of one raise a fund before? Heck, what do you think a VC is if not a seller of capital?

ryao 4 days ago | parent [-]

VCs are run by people with big pockets. See the softbank's vision fund for an example. VC funds typically involve Accredited Investors, who all have big pockets, rather than the rest of us:

https://www.sec.gov/resources-small-businesses/capital-raisi...

As for capital markets, I had misunderstood what the term meant when I replied, as your definition and the definition at wikipedia at a glance looked like it described the lending portion of fractional reserve banking and I never needed a term to discuss the individual "capital" markets collectively. Investopedia has a fairly good definition:

https://www.investopedia.com/terms/c/capitalmarkets.asp

I am going to assume that by capital markets, you really mean the stock market (as the others make even less sense for getting a new business off the ground to produce something new). Unfortunately, a business needs to be at a certain level of maturity before they can do an IPO on the stock market. VC exists for the time before an IPO can be done. Once they are at that size, the stock market can definitely inject funding and that funding could be used for R&D. However, share dilution to raise funds for R&D is not sustainable, so funding for R&D needs to eventually transition to revenue from sales. This would be why the various inventions I had listed had not been funded from capital markets. I imagine many other useful inventions had not been either.

That said, the stock market also is 90% owned by the wealthiest 10% of Americans, so the claim that "Capital markets exist by pooling in the savings even by poor and middle class households" is wrong:

https://seekingalpha.com/news/4464647-deeper-dive-the-wealth...

In any case, despite your insistence that money does not trickle down, your own example of capital markets shows money trickling down. The stock market in particular is not just 90% owned by the wealthiest Americans, but is minting new millionaires at a rapid pace, with plenty of rags to riches stories from employees at successful businesses following IPOs.

DerArzt 4 days ago | parent | prev | next [-]

R&D was already a massive thing before trickle down economics came on the scene. In fact I would argue that since stock buy backs and trickle down economics became the operating model R&D went down. Mainly due to the fact that stock buy backs guaranteed stock growth where as R&D could be hit or miss.

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blensor 7 days ago | parent | prev | next [-]

That is literally what patents were invented for. Give the entity that puts the resources into creating something new some protection to be able to recoup that

ryao 7 days ago | parent [-]

That does not answer the question of how the affordable versions would exist if the money to create them was not there in the first place. You cannot recoup what never existed.

Also, not all patents are monetizable.

blensor 7 days ago | parent [-]

I don't understand your point then. The original product exists because someone used their own or their investors money and made a bet on an idea.

Then they hope they can sell it at a profit.

Products becoming cheaper is a result of the processes getting more optimized ( on the production side and the supply side ) which is a function of the desire to increase the profit on a product.

Without any other player in the market this means the profit a company makes on that product increases over time.

With other players in that market that underprice your product it means that you have to reinvest parts of your profit into making the product cheaper ( or better ) for the consumer.

IncreasePosts 7 days ago | parent [-]

Is the idea that the person with $1M in 1900 had the ability to direct that towards their idea for air conditioning , whereas if the same amount of money disbursed among 100,000 people, they would just moderately increase their consumption and we would end up right where we started?

bayindirh 7 days ago | parent | prev [-]

> R&D was required not only to create initial versions, but also to increase scale.

Not to increase scale, but to reduce the cost of the device while maintaining 99% of the previous version, IOW, enshittification of the product.

> how would the affordable versions exist today?

Not all "affordability" comes from the producer of the said stuff. Many things are made from commodity materials, and producers of these commodity materials want to increase their profits, hence trying to produce "cheaper" versions of them, not for the customers, but for themselves.

Affordability comes from this cost reduction, again enshittification. Only a few companies I see produce lower priced versions of their past items which also surpasses them in functionality and quality.

e.g. I have Sony WH-CH510 wireless headphones, which has way higher resolution than some wired headphones paired with decent-ish amps, this is because Sony is an audiovisual company, and takes pride in what they do. On the other end of the spectrum is tons of other brands which doesn't sell for much cheaper, but get way worse sound quality and feature set, not because they can't do it as good as Sony, but want to get a small pie of the said market and earn some free money, basically.

ryao 6 days ago | parent [-]

Can you honestly tell me that modern cellphones are worse than the original cell phones:

https://cdn.britannica.com/93/172793-050-33278C86/Cell-phone...

As for your wireless headphones, if you compare them to early wireless headphones, you should find that prices have decreased, while quality has increased.

bayindirh 6 days ago | parent [-]

I used phones similar to this (a Nokia 2110 to be precise), BTW.

I can argue, from some aspects, yes. Given that you provide the infrastructure for these devices, they'll work exactly as they are designed today. On the other hand, a modern smartphone has a way shorter life span. OLED screens die, batteries, swell, electronics degrade.

Ni-Cad batteries, while being finicky and toxic, are much more longer lasting than Li-ion and Li-Poly batteries. If we want to talk Li-Poly batteries, my old Sony power bank (advertising 1000 recharge cycles with a proprietary Sony battery tech) is keeping its promise, capacity and shape 11 years after its stamped manufacturing date.

Can you give me an example of another battery/power pack which is built today and can continue operating for 11 years without degrading?

As electronics shrink, the number of atoms per gate decreases, and this also reduces the life of the things. My 35 y/o amplifier works pretty well, even today, but modern processors visibly degrade. A processor degrading to a limit of losing performance and stability was unthinkable a decade ago.

> you will find that prices have decreased, while quality has increased.

This is not primarily driven by the desire to create better products. First, cheaper and worse ones come, and somebody decides to use the design headroom to improve things later on, and put a way higher price tag.

Today, in most cases, speakers' quality has not improved, but the signal processed by DSP makes them appear sound better. This is cheaper, and OK for most people. IOW, enshittification, again. Psychoacoustics is what makes this possible, not better sounding drivers.

The last car I rented has a "sound focus mode" under its DSP settings. If you're the only one in the car, you can set it to focus to driver, and it "moves" the speakers around you. Otherwise, you select "everyone", and it "improves" sound stage. Digital (black) magic. In either case, that car does not sound better than my 25 year old car, made by the same manufacturer.

You want genuinely better sounding drivers, you'll pay top dollar in most cases.

ryao 6 days ago | parent [-]

> Can you give me an example of another battery/power pack which is built today and can continue operating for 11 years without degrading?

I have LiFePo4 batteries from K2 Energy that will be 13 years old in a few months. They were designed as replacements for SLA batteries. Just the other day, I had put two of them into a UPS that needed a battery replacement. They had outlived the UPS units where I had them previously.

I have heard of Nickel Iron batteries around 100 years old that still work, although the only current modern manufacturers are in China. The last US manufacturer went out of business in 2023.

> You want genuinely better sounding drivers, you'll pay top dollar in most cases.

I do not doubt that, but if the signal processing improves things, I would consider that to be a quality improvement.

bayindirh 6 days ago | parent [-]

> The last US manufacturer went out of business in 2023.

Interesting, but they are not manufactured more, but way less, as you can see. So, quality doesn't drive the market. Monies do.

> I do not doubt that, but if the signal processing improves things, I would consider that to be a quality improvement.

Depends on the "improvement" you are looking for. If you are a casual listener hunting for an enjoyable pair while at a run or gym, you can argue that's an improvement.

But if you're looking for resolution increases, they're not there. I occasionally put one of my favorite albums on, get a tea, and listen to that album for the sake of listening to it. It's sadly not possible on all gear I have. You don't need to pay $1MM, but you need to select the parts correctly. You still need a good class AB or an exceptional class D amplifier to get good sound from a good pair of speakers.

This "apparent" improvement which is not there drives me nuts actually. Yes, we're better from some aspects (you can get hooked to feeds instead of drugs and get the same harm for free), but don't get distracted, the aim is to make numbers and line go up.

ryao 6 days ago | parent [-]

> Interesting, but they are not manufactured more, but way less, as you can see. So, quality doesn't drive the market. Monies do.

They were always really expensive, heavy and had low energy density (both by weight and by volume). Power density was lower than lead acid batteries. Furthermore, they would cause a hydrolysis reaction in their electrolyte, consuming water and producing a mix of oxygen and hydrogen gas, which could cause explosions if not properly vented. This required periodic addition of water to the electrolyte. They also had issues operating at lower temperatures.

They were only higher quality if you looked at longevity and nothing else. I had long thought about getting them for home energy storage, but I decided against them in favor of waiting for LiFePo4 based solutions to mature.

By the way, I did a bit more digging. It turns out that US production of NiFe batteries ended before 2023, as the company that was supposed to make them had outsourced production to China:

https://www.terravolt.net/iron-edison

bayindirh 6 days ago | parent [-]

> They were always really expensive, heavy and had low energy density (both by weight and by volume).

Sorry, I misread your comment. I thought you were talking about LiFePo4 production ending in 2023, not NiFe.

I know that NiFe batteries are not suitable (or possible to be precise) to be miniaturized. :)

I still wish market does research on longevity as much as charge speed and capacity, but it seems companies are happy to have batteries with shorter and shorter life spans to keep up with their version of the razor and blades model.

Also, this is why regulation is necessary in some areas.

cheema33 7 days ago | parent | prev | next [-]

My understanding of trickle down economy, could be incorrect, has been that it is a policy that advocates govt. giving money to the rich. Through tax breaks and other means. The idea being that the rich would then spend that money in ways that would allow the benefits to trickle down to the poor.

squidbeak 7 days ago | parent [-]

This is correct. The idea is that money spent by the wealthy enjoying themselves or making themselves wealthier through investments eventually reaches the poorest - in some form.

Quite why we've persuaded ourselves we need to do this through a remote & deaf middleman is anyone's guess, when governments we elect could just direct money through policies we can all argue about and nudge in our own small ways.

neom 7 days ago | parent | prev | next [-]

OP is talking about this: https://www.investopedia.com/terms/t/trickledowntheory.asp

You're talking about this: https://ideas.repec.org/p/wrk/warwec/270.html

:)

ryao 7 days ago | parent [-]

Are those entirely separate things? Hardware development is expensive. Having the money to develop these things and iterate on them enabled them to begin as luxuries for wealthy people and evolve into things the rest of us can have.

wat10000 7 days ago | parent | next [-]

“Trickle down” is about making the masses wealthier in general, not just making shiny new toys for them. It’s easy for the HN crowd to think that a cool new computer equates to wealth, but that’s not what most people consider it to be. Does cutting taxes for the rich allow the common person to buy better food, pay their mortgage off earlier, send their kids to better schools? That’s the question you need to ask about “trickle down,” not how big our TVs would be.

ryao 7 days ago | parent [-]

If it results in businesses like Aldi, then yes. Aldi not only pays above market rates, but charges below market prices for quality food.

Honestly, I have to say that I am relatively happy with the things that I have these days because of obscenely wealthy people’s investments. I have a heat pump air conditioner that would have been unthinkable when I was a child. I have food from Aldi and Lidl, whose prices relative to the competition also would have been unthinkable when I was a child. I have an electric car and solar panels, which were in the realm of fantasy when I was a child. Solar panels and electric cars existed, but solar panels were obscenely expensive and electric cars were considered a joke when I was young. I have a gigabit fiber internet connection at $64.99 per month, such internet connections were only available to the obscenely rich when I was a child. I am not sure if I would have any of these things if the money had not been there to fund them. I really do feel like things have trickled down to me.

wat10000 6 days ago | parent [-]

What’s the connection between wealthy people getting wealthier and businesses like Aldi?

I like electric cars and solar panels and gigabit fiber as much as the next person, but they aren’t wealth.

ryao 6 days ago | parent [-]

Aldi is privately owned:

https://en.wikipedia.org/wiki/Aldi

If you shop there, you are enriching its owners. That is not a bad thing. The more money they have, the better they make things for people, so it is a win-win.

Note that Aldi is technically two companies since the family that founded it had some internal disagreement and split the company into two, but they are both privately owned.

That said, if wealthy people had not made investments, I would not have an electric car, solar panels or gigabit fiber. The solar panels also improve property values, so it very much is a form of wealth, although not a liquid one. Electric cars similarly are things that you can sell (although they are depreciating assets), so saying that they are not wealth is not quite correct. The internet connection is not wealth in a traditional sense, but it enables me to work remotely, so it more than pays for itself.

wat10000 6 days ago | parent [-]

The fact that you’re enriching the owners by shopping there does not imply that enriching rich people will lead to more Aldis being created.

“Trickle down” isn’t just “rich people found companies” or “rich people buy gadgets when they’re still new and expensive.” It’s specifically about making ordinary people financially better off in a significant way by making rich people richer. It’s not about technology at all, and it’s not merely about rich people doing some things that benefit the rest of us. It’s a causal claim about rich people doing more things to benefit us, and it being a positive tradeoff, by making them richer.

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neom 7 days ago | parent | prev | next [-]

You're right to a degree in that they are somewhat coupled systems, the real economy operates in a gaussian of many economic theories, hence it's hard to model and all that. Never the less in traditional economic theory they are analyzed separately. The connection exists but it shouldn't be seen as validating trickle down as economic policy.

conductr 7 days ago | parent | prev [-]

I would argue that technology diffusion would occur even without trickle down economics/tax policies. Even if they were taxed more heavily, there would still be people wealthy enough to buy the v1.0 flat screen, computer, DVD player, etc because wealth is still unevenly distributed and there are still some richer people in the population.

Trickle down economics is supposed to make poorer people more wealthy. Not suppress their wage growth while offering a greater selection of affordable gadgets.

ryao 7 days ago | parent [-]

Would it have happened to the same extent? Also, describing these things as gadgets understates the extent to which they are beneficial, given that a gadget refers to a novelty by definition:

https://www.merriam-webster.com/dictionary/gadget

Among the many things that have become affordable for every day people because money had been present to fund the R&D are air conditioners, refrigerators, microwave ovens, dish washers, washing machines, clothes dryers, etcetera. When I was born in the 80s, my parents had only a refrigerator (and maybe a microwave oven). They could not afford more. Now they have all of these things.

conductr 6 days ago | parent [-]

I could ask the same of you. Do these things only exist because of trickle down? Do you have proof they wouldn’t have been invented and commercialized without it?

I don’t expect either of us to be able the answer the questions posed. Nobody in the 80s was asking for any of these inventions. People were living their lives happily ignorant to a better future. For that reason, most of these things do amount to just gadgets. They have shaped our lives in a dramatic way and had huge commercial success by solving huge problems or increasing conveniences, but they are still nonessential. That’s the way I’m using the term, don’t really care what Webster has to say about it tbh as I’m perhaps being dramatic precisely to highlight this point.

The continuation of R&D isn’t even a trickle down policy. If you’re a big manufacturer of CRT televisions, it’s in your interest to continue inventing better technology in that space just to remain competitive. If you’re really good at it, there’s a good chance you can steal market share. It’s good old fashioned business as usual in a competitive industry. I don’t see how they relate to one another. Not to mention that many things are invented in a garage somewhere and capital is infused later. Would this only happen if the rich uncles of the world benefited from economic policies aimed at making them rich? I think it would still find a way in most cases, good ideas typically always find a way. I don’t think a majority of gadgets can be linked to something like “brought to you by trickle down economics”.

zzrrt 7 days ago | parent | prev | next [-]

Trickle-down economics isn’t about the price of goods coming down over time. I’m not an economist so I’ll leave it up to https://en.m.wikipedia.org/wiki/Trickle-down_economics to explain more.

KingOfCoders 7 days ago | parent [-]

Thanks, TLDR doesn't work says science according to the Wikipedia article.

ryao 7 days ago | parent [-]

A sibling comment linked investopedia.com, which had a very different take on the matter. The TLDR there was:

> The trickle-down theory includes commonly debated policies associated with supply-side economics.

blensor 7 days ago | parent | prev | next [-]

I'd say prices of products come down due to competition, not due to the companies getting more money outside of the regular supply/demand relationship.

Let's assume you have a monopoly on something with a guarantee that no one else can sell the same product in your market. Then there is no direct incentive to make the product cheaper, even if you can produce it for cheaper. Adding more money on top of it that is supposed to trickle down in some way will not make that product cheaper, unless there is an incentive for that company to do so.

The real world is of course more complicated, let's say you have two companies that get the incentives and one of them is using it to make the product cheaper, then that will "trickle down" as a price decrease because the other company need to follow suit to stay competitive. But this again is driven by the market and not the incentives and would have happened without them just as well.

ryao 7 days ago | parent [-]

You seem to describe commodities, rather than new technologies that are not commodities. New technologies start so far out on the supply demand curve that an order of magnitude decrease in price can expand the market by orders of magnitude.

The first cellular phone in modern currency cost something like $15,000. At that price, the market for it would be orders of magnitude below the present cellular phone market size. Lower the price 1 to 2 orders of magnitude and we have the present cellular phone market, which is so much larger than what it would have been with the cellular phone at $15,000.

Interestingly, the cellular phone market also seems to be in a period where competition is driving prices upward through market segmentation. This is the opposite of what you described competition as doing. Your remark that the real world is more complicated could not be more true.

blensor 7 days ago | parent [-]

Prices going up is only true if you also let the specs go up

If you fix the specs and progress time then the prices go down considerably

Take the first Iphone which was $499 ( $776.29 if adjusted for inflation ) and try to find a currently built phone with similar specs. I couldn't find any that go down that far but the cheapest one I could find was the ZTE Blade L9 ( which still has higher specs overall ) then we are looking at over 90% price reduction

guywithahat 6 days ago | parent | prev | next [-]

Tickle down is a bit of a nonsensical term, it's called supply side economics and it's a well studied, proven way to strengthen the economy. It's how Reagan ended stagflation, and is generally one of the first things governments turn to when the economy is struggling

PicassoCTs 7 days ago | parent | prev | next [-]

The end result of state investment into large research projects during the cold war?

Macha 6 days ago | parent | prev | next [-]

Computers of course were invented by a state controlled war economy, pretty much the opposite of trickle down.

Permeation of technology due to early adopters paying high costs leading to lower costs is not what trickle down generally means. Being an early adopter of cellphones, AC, flat screen TVs or computers required the wealth level of your average accountant of that era - it didn't require being a millionaire.

the_other 7 days ago | parent | prev [-]

And yet the wealth gap has only widened over the period between their invention and distribution.

I ask hyperbolically: are they economic enablers or financial traps?

(My hunch is that fridges are net-enablers, but TVs are net-traps. I say this as someone with a TV habit I would like to kick.)