> In terms of overall welfare, an additional dollar in the pocket of a typical union worker is going to be more welfare enhancing than that additional dollar in the pocket of the typical owner. This is from just basic diminishing marginal utility of the dollar.
Remarkably few people seem to truly understand what "marginal propensity to consume" actually means.
Economically, money saved is money lost. Money invested is a promise of debt. Consumption is what drives the economy. That's why the poor and middle class are so important. Without them having enough money, the economics of scale... don't scale.
I'll admit while I'm inclined to believe that it's better to distribute money to workers rather than investors, I don't understand the economic mechanics that makes this true.
I do understand that the rich aren't gong to spend as much as the middle and lower classes, but I don't have a good answer for the predictable trickle-down rebuttal: the wealthy will invest rather than spend, and that investment funds jobs which put money in the pockets of the poor (but perhaps more so in the pockets of the rich?). You sort of touch on that: "consumption is what drives the economy", but I think the trickle-down economics folks would agree and argue that their job-creation-via-investment results in increased consumption? I have a headache.
> I'll admit while I'm inclined to believe that it's better to distribute money to workers rather than investors, I don't understand the economic mechanics that makes this true.
It's probably more true now than during most of history, but it's not always true.
It probably was true in the Reagan era that trickle-down "worked", because there was a lot of opportunity for large scale capital investment to improve the economy and make things people wanted (and provide jobs in the process). That doesn't seem as true now. Investors already have an excess amount of capital they don't know what to do with (and so are just doing things like buying houses en masse).
Consumption also funds jobs which put money in the pockets of the poor.
It has the added benefit of bidding up the price of things poor people need, which yes is inflationary but also incentivizes more resources being provisioned to help provide the things that poor people need.
Remarkably few people seem to truly understand what "marginal propensity to consume" actually means.
Economically, money saved is money lost. Money invested is a promise of debt. Consumption is what drives the economy. That's why the poor and middle class are so important. Without them having enough money, the economics of scale... don't scale.