
Is poverty self-perpetuating? - kradic
http://www.boston.com/bostonglobe/ideas/articles/2008/03/30/the_sting_of_poverty/?page=full
======
phaedrus
The article is mainly about the psychological reasons why people in poverty
act the way they do. I'll add my 2 cents: The fact is people's brains are
wired to not keep doing something when it seems hopeless. Although from an
outside perspective it seems illogical to work less when you have less money,
from the perspective of the person living in poverty they know that no matter
how hard they work, at minimum wage they're never going to have an easy life,
and that's a very powerful psychological force. For instance, as a student, I
borrow money at the beginning of the semester, and I have some big expenses. I
work part time, but my fixed expenses exceed the income I make from working.
So I go to work knowing that no matter how hard I work, or how much I try to
save, it's physically, mathematically impossible for me to ever come out
ahead. By working hard, all I can do is sink into debt more slowly. At least I
have solace in the fact that I will soon be graduating. What if I didn't have
that hope? What if that were all there were to life? I see people every day,
in rural Oklahoma, who live like that, without hope. They go through cycles
where they work for a while, realize they aren't getting ahead for all their
work, and give up. Wouldn't you?

~~~
Tichy
What gets me is that few people seem to consider "find a job with better pay"
as an option. It just doesn't even occur to them. On the contrary, I often
hear stories where people might actually pay more for their job than they
earn, for example if they drive 50 miles every day to work a minimum wage job
(petrol+car maintenance might cost more than what they earn). Either they
really don't get the maths straight, or they see it as a temporary thing (need
one job to get another), or else I don't know...

What about you, what do you study? Are you sure you could not get a better
job, for example by building on the things you study? I must admit I was
stupid as a student - I studied maths, but instead of taking on some
programming job and earning shitloads of money on the side, I just worked
standard student jobs with average (low) pay.

My point: maybe many people just are not aware of the options. I suppose it is
infeasible to assign personal life managers to every poor person, but perhaps
information technology could be some help? For example better job boards.

------
DmitriLebedev
IMO, it is fair that the book was ignored.

The guy completely ignores the time and risk factors, namely being short-term-
payoff-oriented and long-term-payoff-oriented. This is a subject of
microeconomics (not 101, of course - it's a lot of maths, integrals and
derivative functions).

Poor people do not save extra money exactly because of being short-term
oriented. Drugs, entertainment and having early sex also deal with short-term
payoff. Short-term payoff orientation also makes a person more risk-tolerant,
which is a common attribute of criminals.

All the given examples are easily explainable with a utility function that
takes into account risk perception and time discounting (long- or short-term
orientation) and current posessions.

Committing a crime or not is a choice between risky and not risky
opportunities. This deals with risk perception. Few posessions make the low-
risk choice even less valuable. Fixing or not fixing dents on a car fit into
choice between long-term and short-term payoff.

Writing this I suspected that the author hasn't worked with advanced
microeconomics' maths. Indeed, Karelis is a philosopher. I haven't seen the
book, but by his words ("Econ 101 is to blame") suspect that he doesn't know
any more complicated economics. That's the reason he finds it wrong.

~~~
azanar
I will upfront admit only a limited knowledge of economics, but hopefully my
math knowledge will save me enough to sound reasonably collected.

I think you make two assumptions here that are either fallacious, or require
additional evidence.

The first is that the poor are short-term oriented by choice, not by mandate.
Allow me to propose the following Gedankenexperiment. You are a person who is
given sufficiently low pay that your net asset change is $0, or nearly so. You
are presented with an opportunity for a long-term payoff with a reasonably
attractive expected gain, excepting that if the payoff doesn't occur, you no
longer have the wherewithal to pay for food and shelter. If you don't take the
risk, you are given a near certain probability to maintain your current
status. Which would you chose? Keep in mind, these people will place maximum
utility on the basic needs of life before venturing into more discretionary
purchases, as any one else would.

The second is that they are somehow inclined to take greater risks because of
their being in poverty. I'm not convinced by an assertion that even a majority
of poor people end up in a life of crime, or any other high-risk behavior. It
would seem to me there's far more reason behind staying as low-risk as
possible, especially when the few possessions you refer to are the difference
between staying warm and dry, and not. A person with several thousand dollars
in the bank can afford to play high-risk. A person who is in poverty may be
one case of pneumonia away from homelessness.

------
jamiequint
Does anyone here know about the economics of gambling? It seems like the
argument Karelis is making would have strong similarities there. I'd be
interested to see if this suggestion is at all valid.

To explain, in gambling (think lottery tickets, not poker) you trade $1 for
something that actually has less than $1 worth of economic value. There is
obviously another component at work (behavioral, not economic), call it hope.
If economists have found a way to quantify hope in this context it seems that
they could try the same thing with poverty, the results would certainly be
interesting.

~~~
yummyfajitas
I know a little bit. The relationship isn't very close.

Gamblers tend to derive utility from gambling, i.e. the act of gambling gives
them a rush. The extreme case of this is video games. I'll never win any money
by purchasing a Wii (like the lottery, I lose with probability close/equal to
1). But I will derive more happiness from playing Wii sports than I will from
the money I spent on it. Similarly, gamblers enjoy playing the game, and this
gives gambling positive utility (for them).

However, the argument Karelis seems to be making is that the marginal utility
of increased income is zero (for some income range which constitutes poverty).
People don't tend to do actions with zero marginal utility, so they don't try
to increase their income. Basically, earning $15k/year doesn't make you any
happier than $10k/year, so why bother to increase your income?

(Note: he actually claims that "economics doesn't apply to the poor", which is
either stupidity or hyperbole. )

One interesting policy implication of his model (if it is true, which I
doubt): _taxing the poor is good policy_. If a poor person is no happier at
15k/year than at 10k/year, then we should tax all poor people making $15k/year
at 33%. It won't make them any more unhappy, whereas taxing a richer person
will. It also suggests that any wealth transfers to the poor that _dont solve
all their problems_ are wasted (welfare is "all or nothing").

~~~
DmitriLebedev
I'm wondering what kind of utility function is needed to make such a strange
MU function...

As far as dents on the car are concerned, let me write what conventional
microeconomy says. Here is the function to estimate the choices.

U = sum(F(x(t))/(1+r)^t) by t from 1 to infinity (or life expectation), where
F(x) is a momentary utility function, r is "perceptual" discounting rate
(sorry, don't know the English term), which means that F(x) next year is 1+r
times less nice than having it now.

If you don't repair the car, x(t) will be constant, let's say X. If you do,
first period it is x(0) = Y < X, but since t=1 x(t) = Z > X.

The problem is that F(Y) has more weight than F(Z)'s. The more r is, the
greater the difference and more probable the first choice will win. The
problem of poor people is that (1) their r is much more than that of middle
class, and they don't value the future, (2) their F(x) (perception of what is
good) is different.

~~~
yummyfajitas
I think the authors ideas are less about time discounting, and more about non-
linear relations in quantity of problems.

The authors example is a man who's car has many dents. Utility might behave
like U(0 dents) = 1, U(1 dent) = 1/2, U(n >= 2 dents)=0. If a car has 5 dents,
the marginal utility of repairing one dent is 0 (U(5)=U(4)), so the owner does
nothing.

Of course, in real life, most utility functions behave in the opposite way.
Going from homeless to a studio apt? Major gains in utility. Going from a
studio to 1 bdrm? Nice, but not as fantastic.

------
mattrepl
It's interesting that this article is at the top of the front page --
unexpected topic to fit the category of hacker news.

My theory: problem solving and unconventional solutions are of interest to
hackers and this article presents poverty as a puzzle and hints at an
intriguing fix.

~~~
coffeeaddicted
My theory is that a lot of us are rather broke ;-)

------
FleursDuMal
"In challenging decades of poverty research, Karelis draws on some economic
data and some sociological research. But, more than that, he makes his case as
a philosopher, arguing by analogy and induction."

This, for me, is the biggest problem with the article.

~~~
lutorm
I agree, it would be nice with some empirical data instead of just opinion
(not that most other opinions are better supported).

~~~
yummyfajitas
The article does have a little empirical data (towards the end):

>In the early 1970s, a large-scale study gave poor people in four cities a so-
called "negative income tax," a no-strings-attached payment based on how
little money they made. The conclusion: the aid tended to discourage work.

~~~
nazgulnarsil
when you subsidize something you get more of it.

we need to stop all aid to third world countries. not only is the vast
majority of the money absorbed by corruption and armed conflict, even the
money that gets through doesn't help.

of course, this fails to account for the fact that we want those countries in
armed conflict and hanging on our every welfare check because it means we can
take their resources for way below market value. can you imagine how expensive
things would be if the african nations were organized enough to have business
infrastructure?

~~~
eru
Cheaper?

------
browngeek
I agree with this article. The current thinking on poverty is from the rich
man's POV. And consequently, the solutions provided from that POV will do
nothing to eradicate poverty.

One such solution is the "One Laptop Per Child" program. And this article
explains why the OLPC will never work in the impoverished countries. The child
is not hungry for education. The child is hungry for parental care from her
indifferent parents who have given up on getting their bee stings looked at...

~~~
maxwell
We inherit a great deal of wealth opportunity (or lack thereof) from our local
economy. Credit is a social phenomenon, so wealth and poverty can become
infectious. If you're able to easily work and pay for necessities (because of
opportunities largely provided by market climate), then you have the money to
get every bee sting looked at. It becomes a matter of generating sustainable
wealth production, which boosts the pool of potential solutions avilable.

I think the communication potential of OLPC-style laptops is a much bigger
draw than the educational one. Could be the infrastructure needed to leapfrog
over major industrialization in regions seemingly rich in natural resources
and workforce potential, which are squandered by maligned markets. What
happens if children in poor markets have laptops? It could provide a means of
overcoming parental (and perhaps governmental) problems bottom-up.

------
thaumaturgy
I can always tell who's actually been poor for any extended period of time,
versus who hasn't, by the way they talk about the poor.

I've been in and out of poverty a few times. There is some truth to all of
what everybody says, and yet none of what anybody says is the whole truth to
it.

There are individual factors: if you're uneducated, or have a lower than
average intelligence, or lack self discipline, or would just tend to prefer
not to work, then you're more likely to be poor. But, not all poor people fit
any of those categories.

If you're used to receiving hand-outs without having to work much for them,
then you're more likely to keep accepting hand-outs. But, not everybody fits
that, either.

There are a bunch of people that made one or two bad decisions at some point.
They don't have to be stupid decisions, they could just be points where the
person took a risk and the risk cost them dearly. Those people can then find
themselves in one of the most challenging downward spirals that we have in
Western society.

The poorer you are, the more effort it takes to become less poor. Think about
that for a minute. For example, if you're living in an area with good public
transportation -- so that you don't need your own car -- then your rents are
likely higher than they would be in more rural areas, where you'd need a car.
So, if you're poor enough that you can't afford to maintain a car, and you
can't afford high rent, then what do you do? You have to spend even more
resources just staying afloat, making it back and forth to work every day.

Inevitably, people who are trying to work their way out of poverty will begin
to skim from one of two precious resources: their food, or their sleep. Either
they'll take on extra jobs, and work 60 hours a week (or more), or they'll try
to save money on their groceries.

It's possible to save money on groceries and still eat well, but that requires
more time and attention. Those working their way out of poverty don't tend to
have lots of time and attention to spread around.

As you continue to trim down your food budget, and/or cut back on sleep,
you'll develop higher and higher levels of stress and exhaustion, which make
it harder to deal with new problems as they arise. One of the things the
article does get right is the mindset of some of those in poverty: each new
thing is a problem, not an opportunity. Each thing that comes along is
something that has to be dealt with, allocated resources to, worked around.

So, you end up in this vicious cycle, where you start falling behind because
you're too overwhelmed and exhausted to deal with new problems as they arise.

Make no mistake about it, these people are fraught with problems. They can't
afford a good, reliable car, so they have to deal with cars that break down,
that require maintenance, or -- in California's case -- can't make it through
the hairy mess of smog legislation.

There's no magic, easy solution for a person in that situation. They have to
work their ass off, and it's pretty even odds that the average person in the
same situation doesn't have the fortitude to do it.

In a society where over half of the population lives in poverty, the problem
of poverty can reach this incredible runaway condition, where there aren't
enough people left that can help others out of poverty, by providing well-paid
jobs, training, and education.

------
nazgulnarsil
I don't think that you can eradicate poverty (handouts don't count) because
there simply isn't enough non-subsistence related work for 6 billion people.

for our purposes poverty = subsistence or close to it

once energy is cheap (distributed solar) humanity can turn to the problem of
food distribution and education. Once we start getting more people educated
more einstein's and other people who add disproportionate value to humanity
should pop up and we'll get accelerating returns.

the point of all this is to solve the population problem before the population
problem solves us, so to speak.

------
raganwald
No.

Longer answer: My great-grandfather Reginald Braithwaite was one of nine
children (that we know survived) growing up in a one-room shack in Barbados.
His son Leonard was the first Black Member of Provincial Parliament in
Ontario. His grand-daughter Gwen was the first woman AND the first person of
colour to work in Systems analysis with Empire Life.

Sadly, the (possibly apocryphal) Chinese Proverb about returning to poverty in
four generations may hold: her son is chiefly known for blogging.

------
ebukys
The article makes a very good point. I like the dents-in-the-car metaphor. I
don't, however, agree with how he interpreted it. If I have a car with, say,
ten dents in it, and I get one more, no, I am not inclined to try to fix it.
And let us follow his story, and say that someone comes along and fixes all
but two of those dents for me.

The question is, does the fact that I have fewer dents in my car make me more
likely to fix the others? If someone comes along and does almost all of my
dishes for me, am I more likely to wash the last few myself?

I believe the answer to that is not, as Bennett suggests, "Yes."

If someone comes along and fixes most of my car for me, or cleans most of my
dishes, when I had no inclination of doing it myself, why would I stop them?
If someone is going to come and fix my problems for me, why do it myself? All
you have to do is wait long enough, and, like _magic_ it's done for you!

So while it is an interesting theory, the problem is, people become set in
their habits fairly quickly. If I do not wash my dishes one day, I am not
really more inclined to wash them the next. Indeed, why should I? There is
suddenly an almost empty sink in which to store the dirty ones.

~~~
albertcardona
You could try it: go to a friend's home that has his sink full of dishes all
the time.

Wash them all but two.

Go there a couple hours later and see what happened.

That would only be a sample of one though. The experiment may be worth just to
make you realize how powerful the mixture of gratitude, self-hate, the
willingness to help oneself, greediness and generosity is.

~~~
ebukys
Haha, I already know the result. I live in a house with four other girls, and
the sink is usually filled with any number of dishes. Once it becomes
completely piled up (as we don't eat together, and most of us cook real meals,
this usually happens about every other day), one of us will become disgusted
with the others and empty the dishwasher, fill it with dirty dishes, and clean
most of the dishes left in the sink.

Do the remaining two pans and glass get cleaned by anyone else?

Of course not; they are the base dishes that we pile everything else on top of
that day.

Why clean the remaining two dishes, there was originally an entire sink full
of them! Comparatively, it's almost spotless!

------
ericwaller
A negative income tax seems to me like a generally good, if naive, solution.

Of course the problem is that a straight forward negative income tax creates a
resistance level where each additional dollar earned is worth less and less.
The simple negative income tax leads to the situation in the 1970's study
mentioned in the article (people are discouraged from working).

I think the solutions lies in creating support levels, or income targets. I.e.
$15k or less is taxed at 0%, $15k - 20k at -5%. This would establish a support
level at $15k.

I can even imagine a system where meeting an "income goal" (support level) one
year triggers a higher one for the next year. I.e. if you make $16k in 2008
and are taxed at -5%, you must make $20k in 2009 to receive the -5% rate
again, otherwise you'll be taxed at 0%.

Eventually, if the person keeps meeting income targets, they'll no longer be
poor (by definition).

~~~
eru
How about just handing out a certain amount with no strings attached at all?
To everyone.

~~~
eru
And finance by a tax, obviously. So you still get a positive net outflow from
better off people.

------
llimllib
A response: <http://wirkman.net/wordpress/?p=295>

"By the way, vice in any form is self-reinforcing, as he suggests. Ancient
moralists realized it; modern “mental health” professionals do, too. The
behavior of poor people is often that of simple vice. It is not new, nor are
the traps involved.

Example? Think of becoming fat: the fatter you get, the harder it is to
exercise, the less incentive you have to exercise; the less you exercise, the
fatter you get. You get caught in a feedback loop that spirals into imbalance
and self-destruction. Sloth and gluttony (the old terms for two major causes
of being overweight) are not new nor are they hard to understand."

(Please note that I am not agreeing with or endorsing this opinion, merely
providing a link)

~~~
rml
Classifying poverty as vice is worthwhile to a point, but works well only in
very general ways (I know it wasn't your opinion, it's just worth discussing).
The main problem that I see with that view, however, is this:

Take a 12-year-old kid in middle school. Let's assume he is bright enough to
do well, if he did the homework, etc. He goes home every day to a dirty house,
where he spends hours by himself playing video games. His mother is at work
earning an hourly wage, and when she gets home, she is bitter and sarcastic.
His father is gone. There isn't enough money to pay the bills, so the phone,
tv, etc. are constantly being turned on and off (i.e., general chaos).

At his suburban middle school, he has to endure the humiliation of being
pushed toward lower-status "vocational" programs despite his (at least
average) ability, because of his poor attitude, laziness and the fact that his
family is known in his hometown as being somewhat "troubled."

It is only natural that a young person in such a situation might become
disinclined to work hard, because he doesn't know what the point of "working
hard" is. In his world, and the world of his family, "working hard" just means
putting in more hours that enrich someone else. He hasn't been exposed to any
other ways of life, and the well-to-do telling him that he's "lazy" probably
won't serve to motivate.

Having said all that, there is nothing stopping this person from realizing the
error of his ways as an adult and acting accordingly. Luckily, we have many
examples of successful "late bloomers" available to us these days, but I think
for many kids the damage will have been permanent.

~~~
llimllib
And, furthermore, being stereotyped as a poor person will (in a statistical
sense) make him act more as a poor person is stereotyped to act:
[http://www.sciam.com/article.cfm?id=how-stereotyping-
yoursel...](http://www.sciam.com/article.cfm?id=how-stereotyping-yourself-
contributes-to-success&print=true) .

(No worries about discussing it, I was hoping to discuss it. I just get
paranoid that everyone assumes that I believe every word of every link I post)

------
daniel-cussen
It would be interesting to see what the path dependence of poverty is.

------
noodle
this article is much more accurate than the ones i've seen on HN about poverty
in the past. still doesn't hit the nail on the head, but its a lot closer.

------
kingkongrevenge
Poverty as it exists in America today is mostly a matter of breeding and
culture. A thousand words on poverty and no mention of heritability? Drake
either has his head up his ass or his PC blinders on too tight.

~~~
logjam
Ok, why don't you enlighten us all on how "breeding" causes poverty.

You might want to check out something like "Guns, Germs, and Steel", which is
one of the latest works to effectively debunk your assertion, pointing out, as
the article does, how poverty leads to poverty.

~~~
anewaccountname
Guns, germs, and steel actually points out how centuries of being bred in the
presence of prevalent disease due to living in close quarters with
domesticated animals was a huge key in keeping Europe out of poverty and
helping them ruthlessly dominate the Americas.

------
davidw
Offhand, it doesn't smell like hacker news to me. Here's why: it's already
touched off a thread on politics. I'm not convinced that these things don't
degrade with time. And I am certain that in any case, as hackers, our
"comparative advantage" is not in discussing politics.

~~~
lutorm
Another view would be that it is everyones responsibility in a democratic
society to vigourously (but respectfully) debate how that society should be
structured.

~~~
rml
Yet another view would be that to remove one's self from political discussions
with one's peers based upon other, unrelated criteria, such as one's
perception of one's self as a hacker, only serves to underestimate the broad
capabilities of the human mind.

~~~
davidw
I like to talk politics too, actually. However, I think it's an argument that
is poisonous for sites like this. I don't want to see a bunch of links from
mises.org, and the equivalent from the other side - I can get that stuff
elsewhere.

------
mynameishere
The whole article could have been shortened to this one paragraph:

 _In the early 1970s, a large-scale study gave poor people in four cities a
so-called "negative income tax," a no-strings-attached payment based on how
little money they made. The conclusion: the aid tended to discourage work._

Yeah, that's right. The obvious occurred, as usual. All such theories, and all
such fawning articles, rely upon one unalterable precondition: Nobody involved
has actually lived among the destitute, while destitute.

~~~
fortes
Actually, that's the opposite of what the article is arguing (or to be more
accurate, what the guy who the article is about is arguing).

Direct quote:

 _Reducing the number of economic hardships that the poor have to deal with
actually make them more, not less, likely to work, just as repairing most of
the dents on a car makes the owner more likely to fix the last couple on his
own. Simply giving the poor money with no strings attached, rather than using
it, as federal and state governments do now, to try to encourage specific
behaviors - food stamps to make sure money doesn't get spent on drugs or non-
necessities, education grants to encourage schooling, time limits on benefits
to encourage recipients to look for work - would be just as effective, and
with far less bureaucracy._

What you quoted was a common rebuttal to the argument above, which the guy in
the article counters with:

 _Karelis responds that the data from that experiment is in fact quite
ambiguous, and there has been debate among economists over how to interpret
the results. But ultimately, he believes, the strength of his arguments is
less in how they fit with the economic work that's been done to date on
poverty - much of which he is suspicious of anyway - but in how familiar they
feel to all of us, rich or poor._

* Edit: Formatted quotes, thought I could use Markdown.

~~~
mynameishere
_that's the opposite of what the article is arguing_

Exactly. If I wanted to summarize the argument of the article I would
translate from newspeak to English:

 _We want to pay right-thinking, liberal arts majors middle class salaries for
them to administer money distributions from functional people to dysfunctional
people. We have no data to suggest this will help anyone, but we are pretty
sure it will help ourselves._

~~~
crux_
Right-o, to read between the lines here:

"Dysfunctional" people are poor because they deserve it, because they are
dysfunctional and have not earned anything. "Functional" people are wealthy
because they are functional and have earned their wealth.

Let's take a look at a time in one's life before anything can be earned or
deserved: At birth, does one newborn somehow deserve better education,
improved nutrition, and a life that will offer far more opportunities and
fewer hardships than some other child?

No, of course not: By your own ethos, you only deserve what you have earned.
There is no way to make a moral argument that newborns deserve anything other
than equal circumstances to begin to create a life for themselves. (Unless you
are the sort who believes you chose your parents well and deserve the just
rewards of that choice....)

Even for the Ayn-Rand libertarian there's a pretty compelling case to be made
for widespread welfare efforts: not for the poor, who may have earned their
own hardships, but for their children who will suffer without having done a
thing to deserve it.

~~~
mynameishere
Strawman. Sufficiently so that I won't comment further than to say that I was
translating what I perceive _them_ to believe--"them" being the class of
people who thrive on dysfunctional populations.

~~~
keating
crux_ makes a very strong argument that deserves to be addressed rather than
dismissed without comment.

~~~
mynameishere
Well, crux_ misrepresented my views, and that's that.

But fine:

 _At birth, does one newborn somehow deserve better education, improved
nutrition, and a life that will offer far more opportunities and fewer
hardships than some other child?_

In fact, parents are responsible for their own children. I am not responsible
for other people's children. That is a hard, cold fact. The only way to force
equality is just that: To force it. People who are careful with their
finances, with their vocations, with their reproductive activity inevitably
wind up supporting other people's children. Think what you will about that. To
me, it is disgustingly criminal.

~~~
abstractbill
_In fact, parents are responsible for their own children. I am not responsible
for other people's children. That is a hard, cold fact._

That doesn't sound like a "cold, hard fact" to me. It sounds like an _opinion_
on the best way to structure responsibility within a society.

Do you believe you have any responsibilities at all, to society at large? If
so, why do you specifically exclude children?

~~~
mynameishere
_Do you believe you have any responsibilities at all, to society at large?_

Yes: To not force others to raise my children.

~~~
jacobolus
That’s not a responsibility to society. That’s a rejection of society. Which
is to say, in your eagerness to repeat your previous point again, you’re
deliberately avoiding the question asked of you. If the answer is “no”, you
shouldn’t be afraid to say so.

