I've been in a temporary situation where I faced many of the issues I think poor people face. What happens when you are that poor is that you realise the huge mountain above you that you have to overcome to going back to where normal people are, and you just kind of accept where you are now and potter along and try to survive everyday without considering all too much how to get out.
For example, I had $4000 debt. There was no way in hell I could ever pay that money back, considering that I made $900/month which did not cover my monthly expenses. So let's say a month ends where I spend $800 and only have $100 left. Am I going to stick it towards paying off the debt or just buy some new shoes or so? That debt is so huge that I know that saving $100 will still take me so many years, that I just accept the debt and go buy myself some shoes.
Poverty starts when you resign yourself to being poor. A friend of mine is poor - I called him to lunch and brought out $5000 and I told him that if he can think of any idea at all for a business, I would invest these $5000 in his business. I would not check his idea, I would not bother him if it was viable, I would simply give him the money.
Up until today, he has not come to me to pick up the cash. But he still complains about how he has no money. That's the thing - he is resigned to being poor. Becoming rich will mean a lot of work, it's an ardous and long task, and I really don't think he wants to do it, even when the money is offered to him in that manner.
Your friend probably doesn't want to be $5000 in debt to the kind of guy who whips out $5000 at lunch. You most probably already make him feel pretty crappy about himself as it is.
Well...I did it to prove to him that I actually have the money and it's his for the taking, and I'm not just talking idly. I don't really think he is aware that I have a lot more money than he does, since we hang out the same way we've hung out for a long time.
I'm sure you didn't mean it that way but that's not exactly the most sensitive way to handle things. I really wouldn't be drawing too many conclusions about your friend from his reaction to that. I'm pretty sure I'd never take money from someone in (or after) the kind of situation you describe.
I absolutely know what you mean, and there are many friends I would not do something like that with. But with this particular friend, it's okay. He won't perceive it in the same way as some other friends I have. It's like with some friends you can slap them on the ass and some you would not dream of it - bringing out this cash with this friend is not something strange or unusual considering the particular relationship we have.
I get what you mean though, but I know how I usually interact with this friend, and this is basically not such an unusual or insulting act.
You just have to trust that I can guage correctly our relationship. Perhaps I am wrong and in-fact, this was perceived wrong, but I believe not.
Part of your friend's reluctance may simply be a lack of desire to start his own business. I've made similar offers to select family members (with higher dollar amounts) and nobody has taken me up on a single offer. When I ask them why not, they tell me they don't want to take the risk of starting their own business... then go right back to complaining about their horrible boss/small salary/current situation.
I think the two of you might be overlooking some of the social pressure involved in taking thousands of dollars from a close friend. If I made that offer to any one of my friends, they'd turn it down every time. They might say it's impossible, or come up with some other excuse, but most of the reluctance will come from having to see me again if their idea fails.
If you changed your offer to something like, "Hey, I've got about $5k laying around, and I want to start a business, are you interested? What do you think we should do?", you'd probably see more action.
I personally think this has more to do with your friendship than the idea of your friends being mentally "poor".
I think that's spot on. He may not have any idea what to do with the money, and he doesn't want to just waste your money and lose your friendship.
If we were friends and I came to you and said "Look, I've got $50,000 I'm willing to invest if you can just come up with a new drug idea and start it," you would probably tell me you have no idea how to do pharmaceutical research. Well, most people have no idea how to start a business.
Of course, that could be, but what I am offering him is money I don't need, FOR OUR FRIENDSHIP. I know that the money is likely to be lost, and I have already taken that into consideration. I want him to also TRY, also make that step and stop complaining.
If I really wanted something, and someone offered me the opportunity to do it, yes, it may fail and I may lose that friendship, but if that stops me, it means I don't believe in myself enough! It may fail, but it may also succeed! Yes, failure in this case may also mean losing a friend, so the stakes are a little bit higher, but as a friend, he knows that I know he is likely to lose the money. So even if he fails, I will just smile and be happy that at least he tried.
But it's the same trap, you see? He does not want to do it, because he is afraid of failing, and losing money and the friendship. So he can say no, and give that as his excuse, but is that any different from any other excuse?
In this case, I could posit that the risk is even less because I am there to help him, if the money is gone he will not be in debt, he will just be back to where he started.
And you know what? Sooner or later, friends who don't stay at the same socio-economic level drift apart. Yes, there are exceptions, but in most cases people have friends in the same economic class. So people try to bring their friends up, like I try to do, and the friends who don't even want to try, will sooner or later lose that friendship that they don't want to risk.
Taking money from (or loaning money to) a friend is fundamentally a bad idea, and it's quite possible - given that your friend is poor - that he's already taken money from a friend who promised that were "no strings attached," and later lost his friendship when it turned out that wasn't exactly the case. The fact is that people are generally more emotionally tied to their money than they realize, and they end up being more upset about losing it than they thought. I'm not saying you are like this, but most people are, so how would he be capable of knowing that you're different, especially if he (or someone he knew) had a negative experience with this before?
It was kind of you to offer the money, but I wouldn't make negative assumptions about your friend for not accepting it. Consider the possibility that he has good reasons for not accepting it, and that those might be the correct reasons - that he may actually be better off without it in the end.
Maybe because instead of "being his friend" you are telling him he isn't good enough, trying to 'fix' his life for him, getting annoyed at how he isn't trying hard enough for you.
"If I really wanted something, and someone offered me the opportunity to do it, yes, it may fail and I may lose that friendship, but if that stops me, it means I don't believe in myself enough"
And what if you don't really want something, and someone offered you the opportunity to do it, and you didn't do it, would that mean you don't believe in yourself?
But it's the same trap, you see? He does not want to do it, because he is afraid of failing
That's why you think he doesn't want to do it, maybe. That's what you think your answer would be if you were in his shoes, maybe.
Do you actually know why he doesn't want to do it? Have you asked? And listened to his reply?
Agreed, but the reason you'd see more action is that they wouldn't be in it alone. Starting a business is hard, and people feel pretty lost. In making that offer you'd have to consider whether or not you want (and can commit to!) truly starting a business with your friend, versus just saying you will so they'll do something. It's not an offer to make lightly.
There are many unspoken social rules surrounding money that I think both of you are overlooking. Possibly a main reason they haven't taken your money is that they realize that there is very good chance that they'll lose it all and have nothing to show at the end. They probably fear that the potential negative consequences this will have on your long term relationship is too great to risk taking the money.
Starting a business isn't a cure for a horrible boss and a small salary. Most businesses fail, and in the meanwhile you suddenly have N horrible bosses, N being your number of customers.
Me too. I had a creative friend, a borderline poverty case with a lot of energy and interesting business ideas, but lack of capital, so I purchased startup equipment to get something going, and immediately my would-be business partner seized the opportunity with full enthusiasm by learning the equipment, then using that equipment, and countless hours of time and energy all to attain level 80 in World of Warcraft. I could only shake my head in disbelief.
What happened is that I took a risk, and let's just say I lost even more than before. I had to move in with my parents, and I think that's what really changed my attitude. Because before, I was just hanging on. Like, every month I made just enough to get by, so there was no reason not to wake up, go work, then download movies from the piratebay and watch tv shows and waste half the day.
But then I did this thing and could not afford to that. So I moved in with my parents, and I was just so ashamed that I would wake up early in the morning and work till late at night every single day, weekends and weekdays. When I had saved enough to move back out and get my own place, somehow that attitude just stuck and really, if you just work really long days, money comes. Wake up early, work till night, don't have too many friends, don't watch TV and within a year you can afford most anything.
Exactly. Speaking as someone who does not have them around any more, you cannot possibly imagine what it's like unless you've experienced it.
It's incorrect to assume that poor people don't want to work, as well. Most of them want to work so badly that they'll work for less than minimum wage. Think Hispanic illegals here working for < min wage. This really just ends up hurting everybody in the poverty range. But employers don't care; a body is just a body to them, menial workers for minimum pay equals more profits in their pockets and just enough dangled hope to keep them enslaved.
But were you still working for $900 month? You had to to make some additional change after you moved out again otherwise, regardless of your financial cushion, you would have fallen back into the same cycle. Did you change jobs? Re-evaluate and improve upon your current (past) skill-set while living w/ your parents? Go back to school?
Gave up my non-programming job and did programming jobs for clients. Was there for the clients all the time, answer emails within 15 minutes, tell them how best to make their software. I could have done this before I lived with my parents, but just didn't care enough, I guess.
Going back to school is something I did LATER, and frankly, it did not have as big an effect as just working hard for others.
Uhm... It's not that simple at all. If you work for some big company in a cubical, working really long days probably wont help you at all. Do you mean working for yourself long days? That isn't guaranteed either. Perhaps you just mean entry level-ish hourly jobs?
Thank you. My takeaway -- as a help for others in similar situations or if I ever fall into this situation -- is to live below my means (TV is a luxury) and to work harder to pay off those things that are outside normal cost of living. These are good lessons, and it sounds like it was pure determination wrought from shame that motivated you... that the key is to get motivated in the first place to achieve the goal of leaving poverty.
What about sleep? Health? You seemed to pull yourself out, but what was the cost to your body and mental state? How long did it take?
There was no cost to my body as I used the opportunity to exercise a lot as a way of distraction, but socially and mentally, the experience was pretty tough. That shit changed me - if you look at my photos from before and from now, my face is different. Before I looked relaxed and kind of nice-guyish, now I look kind of harder and more evil, if I may put it that way.
I really felt as if I was put through some kind of wringer, and came out tougher, but I also lost part of my humanity. I'm just not as nice a person anymore, less patient, more angry, not as easy-going, not quite as pleasant to be around.
So yes, that shit was not free. I paid for it, I got what I wanted in the end, but I know I'm definitely not the same person as before.
One often looks at the materially poor in developing world and finds them to be at least superficially happy.
The problem here in the west for me is the question of stability - I'm poor and happy but when 20% VAT hits if business goes down the tube then we'll be down and outs.
Literally we're on a knife edge highly susceptible to external forces in a way that makes it hard to be completely content.
I would say "don't think he wants to do it" is more precisely "don't think he thinks he can do it". Speaking with those in charities helping the long term unemployed, I've heard the "I won't be able to/can't do this" phrase much more than "I don't want to do it". It seems to be more about self-belief and confidence than motivation. After all, no-one wants to be poorer than the norm and without work.
called him to lunch and brought out $5000 and I told him that if he can think of any idea at all for a business, I would invest these $5000 in his business
This is incredibly insulting, and it blows my mind that you could be so oblivious.
If I was down and out, and somebody offered me a pair of bootstraps by which to pull myself up, I do not think 'he insulted me' would be on my list of reasons to reject the offer. Of course, that may just be me.
I imagine that your friend doesn't think he could pay the $5000 back to you. He probably doesn't want to feel like a mooch.
I think a better way of approaching it would be to say that you weren't going to just give him money, but that you wanted to partner with him on it. You'll be the money guy, he can be the idea guy.
I totally vouch for the idea of "resigning to being poor". This is what ruins people. I understand that poor people face lot of difficulties and not everyone gets an opportunity what your poor friend got in terms of 5000 cash; but the people who get it are too busy complaining about their poverty rather than working on it and this develops as a life long attitude. It's not that none of the poor people have been able to become rich. There are stories where a poor person alone has created history for himself and lots of other poor people too. If people start working towards their poverty, I think we might have a better face soon.
There's truth in what you say but on your $5k offer, does this friend have a job? If not ok, but if so you're asking him to quit his job for a sum that wouldn't even get him through a year. I wouldn't take it either, $5k is nothing.
Ah, in that case I guess he is either lazy or scared. If you would pay my salary for a year to let me work on any business I want, I would quit today. :)
I think the model is exactly right: too many miseries, not enough motivation to alleviate them. But I don't like the proposed solution of giving away money; that fosters dependency.
I think the best approach is a personal one. Friends I've had who were poor were sometimes poor due to circumstances beyond their control, but most often they had just never learned how to live differently. They hadn't been taught how to handle money. They didn't understand budgets. They ate fast food; we cooked. They bought tons of toys; we had fun money, but it was tracked and budgeted. They bought pre-packaged sausages; we bought potatoes. They failed to pay bills for months on end, constantly fighting fees and debt collectors. We tracked and budgeted everything. For some of these people, it was totally lifechanging just being friends with my family--seeing how we ran a clean household on a shoestring budget, and saved money.
A poor person who's good friends with a not-really-poor person has a lot of advantages. Not-really-poor can alleviate some of the worst pain of poverty: help out when they need a lift or a dinner or an advocate or a place to stay. But the major advantage is lifestyle modeling. Poor can see what Not-Really-Poor does that makes it all hang together, that solves all the problems at once. And he sees how he could maybe get there himself.
Economically mixed neighborhoods, a sense of neighborliness, hobby groups (say, gaming) that cut across social classes and create friendships. I have observed these things to effectively combat poverty.
>But the major advantage is lifestyle modelling. Poor can see what Not-Really-Poor does that makes it all hang together, that solves all the problems at once. And he sees how he could maybe get there himself.
Hmm.
We pay our mortgage and bills on time (mostly), we cook for ourselves, we use second hand washable nappies, walk rather than driving (we need a car for our work though; walking may actually cost more I've never done a complete analysis but have heard this suggested), have second hand and donated clothes and toys and furniture, cancelled our TV license, grow some of our own food, etc., but we're still poor.
How poverty causes poverty for us is that we can't afford as healthy food as we'd like. We don't have time/money for entertainment (except the net which is needed for work) and we get excluded from social activities by entry costs (we can't afford to go out to meals or buy drinks at the pub, etc.).
Moreover as we have a mortgage on a house we have maintenance costs which we can't afford, this is a time bomb really as dilapidation is progressive, early action avoids more cost later. I should now be doing repairs for winter but can't really afford them.
We could be poorer, we can afford 3 meals a day again and even some non-essentials, and largely this has been a choice to value a particular lifestyle and promotion of creativity over material values.
Basically we don't want for more education on frugal living but I can see that others do. Indeed we have friends with more money than us (and in particular a friend on benefits!) that we try and encourage to make savings when we see them wasting money.
Indeed, this is an aspect of poverty often overlooked: when you have no money, everything is so much harder and more expensive. You can't just hop in the car and go downtown for the cost of a little gas; you have to do something like dig up bus fare and wait at a stop for two hours. Tossing a load in the washer instead of hauling it to the laundromat, dishwasher meaning a device rather than a person, buying and storing in bulk because you have an extra freezer. When you're poor, time and money saving devices like these sure would be nice. And then there's the neglect of routine car and house maintainence that becomes acute and expensive, doctor's bills when you couldn't even afford insurance, late fees for missed payments, credit cards that hike the rate on you when you become a "risk". Seems only the rich could ever afford to be poor.
I don't know much about life on the cheap in the UK (which, from your references to nappies and TV licenses, I gather is where you're from). It sounds to me like you know what you're doing.
Over here (in the US), if someone complained they didn't have enough money to eat healthy, I'd be awfully concerned. Unless you have an exotic notion of 'healthy' that involves concepts like organic food and complex carbohydrates, it really is pretty cheap to eat healthy. If you're so poor that you're giving up things like spaghetti, potatoes, rice, beans, carrots, cheese, and milk for ramen, and you've been doing it so long that it's impacting your energy and lifestyle, you're in a really bad way.
Over here I'd encourage you to apply for EBT and look at local food banks. No shame in it. Helping people avoid that kind of poverty trap is what those programs are there for.
There definitely is a level of poverty where the money saved starts to be destructive, and it sounds like you're in it. Sorry to hear that. Sorry to hear you're committed to a mortgate in the midst of that; that makes it hard to downsize, match your income, and take some of the pressure off. Mortgages and creative lifestyles can be a bad mix.
I hope you get the cash flow going the right direction sometime soon.
I am sorry, I don't agree with this at all. I have never had a car, I have never had a problem with laundromats, and I have never bought bulk amounts of food to store in a freezer. For almost a year, I didn't even have a fridge.
These are not the reasons that people are poor, and they did not keep me poor. These DO NOT make it harder or more expensive to live.
Most people I know do the washing once a week, whether they have a laundry or not. I can not conceive of a way in which washing ever day can make your life better or richer.
Catching the bus actually makes things cheaper for you, no need for parking, insurance, gas, cars, etc...
And bulk buying meat is not going to save you that much. There are a lot better things you can do for your diet that will save you money, and improve your health.
When I was in high school, I travelled by city bus while holding two different ultra-low-end programming jobs. I think you are underrepresenting the advantages of having a car.
If I expected to be earning and living on less than perhaps $12 an hour for an extended period of time, I would probably choose to go without a car, likely by moving someplace like Dallas TX (where I live now, and where the local wages vs. cost of living seem reasonably favorable) and renting an apartment very close to a bus line on a major suburban business artery. Judging from my high school experience, from many observations of foreigners living off their science grad school stipends, and from everything I've noticed in my years in Dallas, that'd work reasonably well. But doing without a car would constrain my life in important ways (including job options, education options, and general time efficiency) and I'd be very motivated to find economical ways to reduce the problem, e.g. sharing a car, or getting (and probably learning to maintain) an economical motorcycle.
>Catching the bus actually makes things cheaper for you, no need for parking, insurance, gas, cars, etc...
Where do you live? Here the standard bus fare is £1.3 per journey. Travel to work alone would set us back at least 900 per year (I think more); though you can get about 1 journey in 30 free if you buy a season ticket (cashflow - argh!). Then there's weekly shopping trips - it's actually 2 journeys to our nearest supermarket as the bus routes aren't good, makes it cheaper to order delivery. I've walked carrying backpacks and baby before but it's a very big hill on the way back.
We have to run a large car for work; wholesale stockists, deliveries, trips to venues all with equipment and materials. Given this basic cost is already in place then there is no way that we can make using the bus cheaper than the marginal cost of an additional car journey. Same goes for trains. Internal flights with budget airlines can be cheaper than driving.
Even without having to run a car already it's quite a close call wrt buses - we had no car for a year, then got a scooter for a year (cheaper than buses and more versatile), then a van, now we have a family ...
After our last car died and before we got a loan (family, yay!) through for the next car we took a trip out for a special meal by bus. It would have been 2 journeys ( it was 1.20 then, 6*1.20 = 7.20) but we walked the 30mins into town with our 4yo; journey time 2 hours to our nearest Frankie & Benny's. Of course I had to carry the lad most of the way home afterwards.
Buses often annoy me as they whizz past me almost empty on my walk home (which follows the bus route) taunting me to spend the value of tomorrow's lunch.
You seem to live cheaply so your best option is to probably find a higher paying job (or create one). Much of this advice if for people you make a lot but don't spend it well.
Anyway, buying a large freezer can quickly pay for it's self if you have extra floor space. They are extremely energy efficient and can make it cost effective to travel to bulk stores like Costco occasionally and save significant amounts of money and time. Also you can store more than just meat in there, bread and other dry goods last far longer in a freezer.
It was crap then and it's crap now. Karelis doesn't understand econ, but criticizes it because econ disagrees with his thought experiments and political leanings. His theory is nothing but traditional econ with a modified utility function. It has rather perverse implications (i.e., we should tax the poor but not the rich), and as the article notes it does not agree with experiment.
The best reason for completely ignoring Karelis: "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."
Karelis doesn't understand econ, but criticizes it because econ disagrees with his thought experiments and political leanings.
Sounds like a model economist to me - because of his political leanings, he doesn't like what the oversimplified toy models of the more mainstream theories tell him, so he invents another toy model with different oversimplifications, and claims that it's more fundamental. Surprise, surprise, it happens to reinforce his pre-existing beliefs!
Isn't this the way the game is always played in the soft sciences, where we can't actually figure anything out for reals?
I say he doesn't understand econ, simply because he says "traditional economics doesn't apply" and then describes a theory which is traditional econ with a simple mathematical modification.
Also, the theory of diminishing marginal utility has been tested empirically many times. While quite a lot of econ is the theory spinning you describe, DMU is pretty solid and accepted by economists of all political stripes (it's the primary argument for progressive taxation, among other things).
If traditional economics applied to the poor, a whole lot of things would be working a whole lot differently now.
So it seems he's right about that. Whether he actually understands economics or not. And it's likely that he does understand traditional economics to some degree, it's not hard, he prob took intro, micro and macro like everyone else. Those models quite clearly do not apply to the poor or else we'd see a different poor.
If traditional economics, specifically "Econ 101" (which is actually what he disparages in the article) applied, the poor wouldn't be so dumb with their money, wouldn't be the biggest buyers of lottery tickets, drop out of school disproportionately just for being poor, etc.
According to "Econ 101", people are supposed to pursue their rational self-interest and maximize utility regardless of their conditions. Which is a bit of a problem with all of economics, and a huge problem when it comes to applying it to the poor.
Does that make sense?
I read an interesting paper a few months back about the lottery ticket thing. This guy's theory was that it actually was rational, because many poor people don't have access to bank accounts, they just buy a scratch ticket every day and that's effectively a probabilistic bank account. Dunno that I buy it. But a neat thought.
Traditional economics characterizes the poor as having a very high discount rate. Thus, they assign a low value to events which might happen in the future - that is, a high paying job in 5 years is less valuable than using meth now.
In much the same way, I (a middle class person) would rather have $100 now than $102 in 50 years.
As for lotto tickets, traditional econ says the poor derive utility from playing lotto, not just from winning. Am I foolish and not obeying the laws of economics for buying video games, which have an expected payoff of $0?
Thus, they assign a low value to events which might happen in the future - that is, a high paying job in 5 years is less valuable than using meth now.
That's two different classes of events and you are misrepresenting what was claimed by attempting to further devalue poor peoples choices by saying they would rather use meth than work. It's also insulting towards poor people to imply they are all meth users. A proper analogy would be that they disproportionaly value a job they can have right now over a higher paying job they can have in 5 years.
So, the original author's point was that the discount rate thing applies differently than you're applying it.
They're not choosing less satisfaction now rather than more satisfaction later. They see things as hopeless (too many bee stings), throw their hands in the air and say screw it. A 0% chance of a high-paying job in the distant future discounts to 0 utility at present for any discount rate.
Karelis isn't talking about discount rates at all.
He is claiming the poor have a flat utility function with a kink at zero. I.e., the ability to cure 1 bee sting (out of 5) now is worth nothing to them, only the ability to be bee sting free holds utility.
I think to understand the point I'm trying to make, we could re-examine your previous statement: "Am I foolish and not obeying the laws of economics for buying video games, which have an expected payoff of $0?"
If the laws of economics predict that you shouldn't buy that video game, then you're not foolish -- they are.
People's behavior changes radically when you give them experimental situations that involve gaining or losing money -- they're way more risk averse with losing 100$ then they are with changing their odds of winning 100$. This isn't baked into the assumptions that economics makes, and neither are a million other wrinkles of human behavior.
"What economists say" isn't the be-all and end-all, it's just another prism to be used.
"In many cases, Karelis says, diminishing marginal utility certainly does apply:"
Either way, I'd like to know why exactly he and the article are crap. I'm not completely sold on it myself, but you've really only managed to appeal to authority so far.
The main reason his theory is crap is it just doesn't agree with experiment. The article mentions several, all of which tend to encompass the income regime Karelis is presumably talking about. One example is the negative income tax experiment of the 70's, another is welfare to work.
If Karelis has evidence of his theory, he should present it. But as it stands, he is pushing thought experiments and analogies, and telling us to ignore the empirical evidence when it disagrees with his theory.
I thought his main policy suggestion was just solving poor people's problems without strings attached (has the same effect and is cheaper to run with no bureaucracy).
His main theory is that poor people's utility function is flat.
The policy implications are more nuanced than he says. We should do one of two things: 1.) give the poor so much money that they get into the region with an upward sloping utility function, assuming such a region exists. 2.) Tax the poor, since taking some of their money will not make them worse off (what's one more bee sting?).
1.) The Bee Sting model doesn't imply that the poor have a completely flat utility function - just a huge drop-off at some point and then a gradually decreasing plateau from there on. Indeed, the poor do seek to improve their utility functions - with booze and drugs and short-term gratification - in ways that would never allow them to overcome that seemingly insurmountable drop-off. The initial drop-off is the chief characteristic of the Bee Sting model.
2.) Utility functions are mathematical tools, and our interpretations of and use for them don't exist in a moral vacuum. Why should tax policy seek to minimize it's effect on our utility functions at all? Why not take $40000 from Warren Buffet AND the primary school teacher? Local movement on one's utility function is important, but so is absolute position, with all of the attendant moral implications.
1.) If the utility function of the poor wasn't flat, they would make some effort to cure a few bee stings.
2) Tax policy should minimize impact on our utility because the goal is (in principle) to harm people as little as possible. This is why we consider it fair to take $1 million from Buffet but nothing from a poor person - the loss of $1 million will harm Buffet less than the loss of $50 would hurt a poor person.
If Karelis is right, taking $50 from a poor person won't hurt them at all - what's one more bee sting?
Your argument misses the fact that there is a huge difference between not having money and being impoverished.
Sure, adding one more impossible task on top of everything else a person who views the world as a set of impossible challenges does not significantly change that person's miserable life. (Your odds of collecting are admittedly low though.)
However there are plenty of other people with similar incomes who manage to make ends meet. For those people, adding the additional burden can easily make all the difference between holding everything together and having their lives fall apart. That's a huge change in utility. (I can name two of these off of the top of my head.)
Furthermore there are other people who are temporarily impoverished. They weren't so. Now they are so. They may be better soon. Punitive measures like the ones you suggest can greatly lessen their odds of coming out of poverty. (I can easily name multiple friends of mine who were temporarily homeless with no resources, who managed to reconstruct their lives.)
There are two excellent reasons why the bee sting theory of poverty can be correct, which would invalidate your conclusion that it is not bad to heavily tax the poor.
1.) No, if the utility function of the poor wasn't flat, they would make some effort to <i>address</i>, not <i>cure</i>, a few bee stings. And in fact they do address those bee stings - they booze and drug themselves into numbness.
There's no point in <i>curing</i> anything less than all the bee stings, because of the huge drop-off in their utility function. Would it make any sense at all for you to attend 1/2 of medical school if you wouldn't eventually enjoy the pay-off of becoming a doctor? Would doing half the monumental amount of work to start a successful business make you rich? And yet you probably wouldn't think that you have a flat utility function, would you?
2.) This is only relevant if you make the flat-utility function assumption, which I don't think is true.
If U(4 bee stings) > U(5 bee stings), a poor person would attempt to eliminate a bee sting since they would increase utility by doing so. The fact that there is a spike at x=0 bee stings is irrelevant, it does not make it pointless to go from 5 stings to 4, it just means that going from 1 to 0 makes you happier than going from 5 to 4.
If Karelis asserts there is no utility gain in going from 5 to 4 bee stings, then Gain = 0 = U(4 bee stings) - U(5 bee stings), or U(4 bee stings) = U(5 bee stings). That's a flat utility function.
Would it make any sense at all for you to attend 1/2 of medical school if you wouldn't eventually enjoy the pay-off of becoming a doctor? Would doing half the monumental amount of work to start a successful business make you rich? And yet you probably wouldn't think that you have a flat utility function, would you?
You've just described exactly what a flat utility function means. U(0 years of med school) = U(half of med school). And similarly, there would be no harm in kicking people out of med school who would not finish anyway.
1) It doesn't have to be completely flat, just fairly close to it. A "bee sting" is perhaps too mild a way of describing the problems of a poor person. Is it easier to understand what Karelis is talking about if you imagine a poor person who, instead of four bee stings, has three out-of-wedlock children, ignorance of contraception, a third-grade education, and a drug habit? Solving any one, or any two, or three, of these problems, still wouldn't be enough to lift them out of poverty, which seems like a pretty obvious point.
2) I suppose this might be seen as biting the bullet and admitting to an indefensible point, but I do not find it hard to imagine that if I were poor and desperate, and some asshole came and took my last $50, and I had absolutely nothing, nothing else with no hope of being able to improve things, I wouldn't care. I was already fucked anyway.
If Karelis is right, taking $50 from a poor person won't hurt them at all - what's one more bee sting?
Karelis's viewpoint is that they wouldn't have spent the $50 to alleviate the bee sting. They would have spent it on something that did give them utility. That nice thing (that they really couldn't afford!) what is taken away with the extra taxation.
That said, I think the point you make is reflected in a lot of real public policy. Poor areas get the worse public services, the most pollution, etc. They have so many bee stings that they can't be bothered to complain about one more.
> Hey, maybe supposedly being able see Russia from her house really DOES give Ms. Palin foreign policy experience.
You do know that that's from SNL, not Palin. (Since you're suggesting, correctly, that one should go with data, it's curious that you used fiction as supporting evidence.)
Border state governors do negotiate with neighboring countries, just as other governors negotiate with neighboring states. Alaska mostly deals with Canada, but there's some stuff with Russia for the Bering Strait. (Palin's house isn't near the strait so she can't see Russia from her house.)
GIBSON: What insight into Russian actions, particularly in the last couple of weeks, does the proximity of the state give you?
PALIN: They're our next door neighbors and you can actually see Russia from land here in Alaska, from an island in Alaska.
GIBSON: What insight does that give you into what they're doing in Georgia?
PALIN: Well, I'm giving you that perspective of how small our world is and how important it is that we work with our allies to keep good relation with all of these countries, especially Russia. We will not repeat a Cold War. We must have good relationship with our allies, pressuring, also, helping us to remind Russia that it's in their benefit, also, a mutually beneficial relationship for us all to be getting along.
Yup, and what she said was true. The riff, not so much.
Governors do deal with neighboring countries and states. What part of that do you find scorn-worthy?
Senators may be asked by the president to deal with other countries but have no formal role in foreign policy beyond voting on legislation and overseeing the state department.
Her first big televised address -- the one that had the related statement -- actually had the middle of the statement edited out. The statement, as aired, was pretty bogus, but it makes a lot more sense when you read the whole transcript.
"The core of the problem has not been self-discipline or a lack of opportunity," Karelis says. "My argument is that the cause of poverty has been poverty."
-- end quote --
Being Indian, I have spent a lot of time observing and thinking about poverty from childhood, and in recent years, doing something about it. I believe he has hit the nail on the head with his analysis of the problem, yet I completely disagree with his solution, which is negative income tax i.e direct government cash to the poor.
Here is where I believe he is right. Poverty is a "phase transition" effect: there is a point of being too-poor below which you lose all motivation to better yourself, not only because there are too many problems but also because those problems are all interlinked, so solving just one feels utterly pointless. Spend time in any very poor neighborhood and you will see this. That poverty threshold would be different for different people, and you can aggregate these thresholds for a distinctly identifiable group to come up with a "group poverty threshold", which itself is a function of the group's history and culture. Once you are below that threshold, poverty is very hard to escape. You can state that as "poverty is the cause of poverty."
Yet, I also completely disagree with his solution - direct cash grant from the government. To prove the absurdity of it, imagine this on a global scale. Is the solution to Indian poverty then massive transfer of resources from the rich world?
So what is the solution then? Here is a sketch: the trouble is there are so many interlinked problems it is not even clear where to start. It is utterly chaotic. To overcome it, first create a very small "Zone of Order" (one room, one household, one neighborhood, one small company, one city ... whatever) where you establish clear, orderly systems. China called this the "Special Economic Zone" which they modeled by taking advice from Hong Kong and Taiwan businessmen.
Once you prove that working, scale it up. You have to bootstrap from that "Zone of Order", however small that is. At a personal level, it could be just one small corner of your shack or one hour a day of order, and for a country like India, it could be one city.
You can generalize this principle: the solution to any self-referential problem ("poverty is the cause of poverty") is bootstrapping from a very small seed. In fact, I believe most intractable problems are self-referential.
So what is the solution then? Here is a sketch: the trouble is there are so many interlinked problems it is not even clear where to start. It is utterly chaotic. To overcome it, first create a very small "Zone of Order" (one room, one household, one neighborhood, one small company, one city ... whatever) where you establish clear, orderly systems. China called this the "Special Economic Zone" which they modeled by taking advice from Hong Kong and Taiwan businessmen.
The demoralization of poverty is very similar to the malaise of personal disorganization and clutter. The solution is also very similar! I think this can also apply to the rehabilitation of a badly maintained code base!
It's not simply a lack of money. Americans were poor for a long time and yet progressed. It's the poison of being surrounded by people who don't wish to progress for whatever reason: it threatens their place in the hierarchy, they lose control, it creates fear in them, they have self-doubt, they are envious of others, etc. Individuals can be plucked out of that environment and be given hopeful surroundings in which to progress. But any individual who doesn't want to change won't change despite all the help they're given. Try getting someone to give up drink or drugs when they don't want to despite the self- and other- harm they are creating. It's like that.
The real problem isn't that people are poor (they lack money), but that people are broke (they have debts they can't clear).
Those debts can be actual money owed or other essential expenses (i.e. insurance, repairs, education, etc). Once you are broke, then paying off your power bill won't make a big difference, because you will still have to fight off the credit card company ... and you will still be broke.
Think of it in terms of a GPA. If your GPA is 1.5 (poor), you still have an incentive to work hard and raise it to 2.0. But if your GPA is 0.3 (broke), then even if you work hard you still won't pass. So why bother?
People do drop out for other reasons (drug issues, mental health, and so on) but the article raises a very important point - people drop out when they are broke and can't make ends meet (in the near future) even if they work hard.
I've always seen the words broke and poor used in the opposite way you are using them. Being broke is a temporary situation, being poor is more of a state of being. e.g. Elon Musk is broke but he's not poor.
I'm using them in a similar way. Elon Musk won't solve his problems by getting a part-time job at Wallmart, so why should he bother? The same is true for a lot of people who are also broke, but happen to be poor as well.
> I believe he has hit the nail on the head with his analysis of the problem, yet I completely disagree with his solution, which is negative income tax i.e direct government cash to the poor.
You misread the article. That "negative tax" was a test project that predated Karelis' paper. His advocacy is more in line with systems like the "Earned Income Credit" which serves as a multiplier of the "reliever" effect, thereby making the smaller problems that remain seem easier to surmount. This is actually similar to your bootstrapping proposal, in a way...
Not exactly what is meant by "negative tax" in the article. You have to earn money before you're eligible to get the credit, with the amount based on size of family. Whereas the negative tax of the article gives you more and more money the less you have. (The EIC's capped, and if you make too little money, say via only a part time job, you don't get the full credit. What the article calls a negative tax would pay you the maximum amount if you earned nothing for the year.)
I think a lot of us can empathize with this theory. Motivation increases as a tangible milestone is in the near term and if nothing is within a reachable distance it becomes increasingly difficult to start down the path. It's similar in concept to all of the problems people have completing a project because the end goal is no where in sight.
The interesting part is how you use this theory to help the impoverished. Can you just throw specific vouchers at the situation to alleviate some of the problems, as the end of the article suggests? I don't think this is feasible - it moderately resembles the Gulf coast debacle right now. Sure you can stop some of the problems, but rarely does it solve everything.
The book sounds interesting, but all the reviews state that the author lacks data to back up his intuitive claims. I'd love it if he could provide some hard evidence to the theory, though I bet the most intuitive social claims often are hard to prove scientifically.
"It's Econ 101 that's to blame," Karelis says. "It's created this tired, phony debate about what causes poverty."
This question is based on faulty assumptions. There is no cause of poverty: it is the natural state. Tens of thousands of years ago, all of our ancestors were running around barefoot and naked. Just a few generations ago, none of our ancestors even had refrigeration nor access to antibiotics.
So every one of us comes from a line of people who didn't enjoy nearly as much luxury as we've got today. The reason we're no longer in that situation is because we (that is, ourselves and our progenitors) have worked our way out of it.
I think you have a point. Most of the people in poverty in America right now are materially better off than almost everyone 500 years ago, and most of the poor in America remain better off than most of the people in say Afghanistan.
With that said, the close tie in to material wealth is your place in society. A good hunter-gatherer might have none of the luxuries we take for granted now, but he probably has the respect of those around him and looks around and sees he is well off compared to his comrades. He is likely to be happy, and to feel that his work is paying off.
A poor person in a ghetto may look around and see many others that are much better off than he is. He may see that many people outside the ghetto give him no respect, and that even many of the well meaning ones look at him with pity. He may react to this with determination to improve and leave the ghetto. But he may react with anger or resignation, and he may feel (whether accurate or not) that no amount of work will help him change his lot in life. He is vastly better off in a material sense than the hunter gatherer, but worse off in terms of his place in society and his (perceived) ability to improve that place.
It is this emotional response to the social issue, much more than their material situation, that is cogent to the situation.
Most of the people in poverty in America right now are materially better off than almost everyone 500 years ago, and most of the poor in America remain better off than most of the people in say Afghanistan.
Or even better off than most of the people in America, 1960.
Is this true? My grandparents were poor in 1960 yet had a big house and a decent car, a coffee maker, a big yard, etc. Why are poor people better off now? Because they have the internet?
The poor of today also have the house and the car. They also have air conditioning, a washer dryer, a microwave, cable TV and other such things. No one had that in the 1960's. In fact, a big chunk of the 1960's poor didn't even have a flush toilet.
I got curious why you mentioned that your grandparents had the coffee maker. It's because they were actually pricey in the 60's: $29.95 or $215 in 2009 dollars! A coffee maker was actually pricier than a wii.
The thing is, there's a difference between the poverty of a hunter-gatherer and the poverty of an urban family.
Some of it is being barefoot in a paved world covered with broken glass, but a lot more is connected to the enduring effects of poverty. A child raised in poverty then has fewer barriers to overcome- in fat times, even the worst hunter could be eating as well as the best. To say they're both in poverty because they lack shoes and clothing they don't need is missing the point.
Today, you have a huge number of knock on effects from e.g., lack of good schooling and "poverty decreasing" social networks that practically turn poverty into a personal attribute rather than a temporary state.
By referring to "the cause of poverty", the OP makes it seem that each of us is destined to riches and luxury, unless something goes wrong and condemns us to poverty.
What I'm trying to illustrate is that this is actually the opposite of the truth: each of us has a lifetime of poverty in front of us, unless we do something to ensure that we do not.
Granted, it's easier for some of us than others: the "silver spoon" thing. But the fact remains that riches are not the default state, at least for the vast majority of us. We are destined to be poor unless we take steps to avoid it.
In the modern world, medicine, refrigeration, education, electricity and so on are all essential, but they do not contribute to prehistoric poverty.
If you don't need shoes, you can't say poverty is not having shoes.
(On the other hand, perhaps you could convince me. Are we in poverty now? After all, we lack universal cancer cures, Dyson spheres, and sexiness epidemics.)
There's a difference between not having riches, and being in poverty. There's even a huge difference between being poor, and being in poverty. Nobody needs riches, but everybody needs food, trees, clothes, shelter, medicine, and books. Poor people can often have these things - but people in poverty struggle even for those basics.
I don't agree with the author of the posted essay but nevertheless.
I take issue with your use of the term "struggle". "Struggle" implies the poor are actively trying to improve their situation.
In reality, 80% of the poor are sitting around on the couch hoping for someone else to solve their problems. I wouldn't describe that as "struggling" so much as "loafing".
There is this scientific concept of "learned helplessness" - it applies to fleas, and it definitely applies to humans. If you've ever watched an upper-middle class housewife crumble in the wake of a divorce, you know it's true.
If we are the average of our 5 closest friends/family members, that we spend the most time with, then kids born in poverty are born DOOMED. Unless something intercedes. "Something" must be more than just giving them money, by the way.
Two married friends of mine met in Teach for America. Unlike just about everyone else, they kept doing it. She taught in a public school in DC, he taught in a charter. (Charter schools are drastically better than the public ones, but still horrendous by any lower-middle-class bar.)
Her classroom didn't just not have books... it didn't have power. That's right: no lights. There was enough electricity between two adjourning classrooms to power ONE box fan in the summer. That means only one classroom could have a 60-watt lightbulb or a fan.
If that is the situation you grew up in, if that is the situation you saw at school, do you really think you would believe the crazy skinny white lady up front telling you that if you stayed in school, you could succeed?
No. You wouldn't. You'd have to be stupid to believe one woman against everything your experience, and your eyes, tells you: that you are doomed. That the only people you know who make any money, who have any chance, are drug dealers. The teacher telling you this can't be trusted - she's poor, too, and stupid maybe, if she's stuck trying to teach a bunch of wasted, doomed kids like you.
You can quote studies all you like that show that people in poverty aren't trying hard enough. But they mean nothing without the context of the rest of their lives.
This sounds very much like some of the theories that one hears when talking about the causes of procrastination when faced with an overwhelming task. For example, the quoted section here:
One difference between the two cases is that the situation with many of the poor may be such that the problem they are facing may be unsolvable (i.e. it's not just a matter of 'getting to work') or at least unsolvable given the current framing of the problem. This means that the rational solutions that people suggest for procrastination problems, such as breaking the current task into small chunks, are not rational solutions to the problems the poor face. Hence the bee sting theory.
When I was younger, I used to look at poor people and condemn them for being lazy and irresponsible. It's when I started paying bills that I realized that many lower middle-class lives hang by a thread - a missed paycheck can sometimes be catastrophic.
I often wonder what I would do if I were poor. I'd have hope-I'm a smart kid, eloquent, so I could dig myself out of it. But what of those who, through no fault of their own, are not so lucky? To me, it is an absolute marvel that they don't engage in more mayhem.
If you follow international news, you've probably watched the drama unfold here in Jamaica over the extradition of Christopher 'Dudus' Coke. A resident of Tivoli Gardens, the inner-city community where Coke was from declared on local news that 'Jesus died for us, so we will die for Dudus.' Many people I know were upset by her statement, because they don't understand. Sure he was a criminal. Sure he was involved in drugs and murders. But when he's the one sending your six kids to school, paying for medical care for your grandmother, and providing swift and effective justice, let's just say your loyalties will not be to the state that has repeatedly signaled its lack of care. Fuck the 'social contract.'
* To me, it is an absolute marvel that they don't engage in more mayhem.*
The way the gap (chasm, really) between rich and poor keeps growing makes me worry about more mayhem in the future. People who feel persistent despair and lack of hope (regardless of if that feeling is "right") don't operate in the same universe of "rational decision making". That behavior ranges the full span of self-destructive (what the article was about, mostly) to full on sociopathic.
This is not to say that I have any new or novel ideas on how to fix the problem.
Exactly! The core issue is lack of hope. When hope is gone, all is lost.
And then you see someone driving by in their brand new Mercedes, and you can see in their faces that they've never had to work a day in their lives, it fills you with a boiling rage at the unfairness of the world. To hell with law. To hell with society. I'm gonna get mine. To be honest, it's difficult to blame them.
Note, I've never been poor. Growing up, the only times I went hungry were when I was too lazy to cook - there was always food in the house. So I was kind of naive. I remember my father (he was a pastor) once telling a congregation that he told the Lord that if he ever reached a point where he couldn't feed his family, he would just run away. So I didn't really know the facts of life.
Now, the veil is being lifted.
This, perhaps, is where religion is most useful. If you can convince the poor that there is some sort of 'divine plan,' then people can come to terms with their suffering.
On my way to work each morning, I pass people in the streets, begging alms. They gather at the stoplights, and come to the car windows with their hands outstretched. That is their life, day in day out. Are their lives really worth living? I'm not sure. I'm just not sure.
Maybe Schopenhauer was right about life. I tend toward nihilism quite often these days.
Actually, you are exactly right to be worried. I know because I spent 4 months researching small arms violence (for the Boulder future salon). The Small Arms Survey is an extensive series of research publications from a UN-funded research group in Geneva. And according to them, the single strongest predictor of small arms violence is wealth inequality. The #2 factor is poverty, in absolute terms. My take on this is that inequality creates resentment, and poverty in absolute terms (going hungry) creates desperation. Desperation+resentment is a deadly combination. After that, social attitudes about violence play a big role (For example, Japan since WWII has developed cultural attitudes that inhibit violence, but Latin America hasn't.) Another predictive factor is males ages 15 to 30 who are "unemployed and not in school." Drug trafficking is also a strong correlate with small arms violence. In some parts of Mexico today (cities like Juárez that directly border the US) you can see all these factors at work: higher inequality than the US, higher poverty in absolute terms, weaker cultural attitudes inhibiting violence, and serious drug trafficking, with young unemployed male sicarios.
I've always liked the idea of "learning or earning" whereby if you become unemployed you get a welfare benefit to study for 3, 6 or 12 months in university or vocational training and then guided through improving your CV and then you hit the job market again. But I come from, and live in, various countries where there is decent welfare, universal healthcare and deferred interest-free loans or token fee university education so that's in place more or less anyway although it could be formalized and streamlined more. A lot of infrastructure would need to be put in place for such a system to work in the USA.
>But I come from, and live in, various countries where there is decent welfare, universal healthcare and deferred interest-free loans or token fee university education so that's in place more or less anyway although it could be formalized and streamlined more
Try an alternative browser like Atomic Web - you can change your user agent string to look like Safari/Webkit for desktop and get the full version of websites that try to reroute you to a mobile version.
The key insight is that poor people feel that they lack control over their condition. Thus, any marginal effort is perceived to be 'useless'.
If you don't feel like checking the above link, read the following excerpt and draw your own analogies:
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In part one of Seligman and Steve Maier's experiment, three groups of dogs were placed in harnesses. Group One dogs were simply put in the harnesses for a period of time and later released. Groups Two and Three consisted of "yoked pairs." A dog in Group 2 would be intentionally subjected to pain by being given electric shocks, which the dog could end by pressing a lever. A Group 3 dog was wired in parallel with a Group 2 dog, receiving shocks of identical intensity and duration, but his lever didn't stop the electric shocks. To a dog in Group 3, it seemed that the shock ended at random, because it was his paired dog in Group 2 that was causing it to stop. For Group 3 dogs, the shock was apparently "inescapable." Group 1 and Group 2 dogs quickly recovered from the experience, but Group 3 dogs learned to be helpless, and exhibited symptoms similar to chronic clinical depression.
In part two of the Seligman and Maier experiment, these three groups of dogs were tested in a shuttle-box apparatus, in which the dogs could escape electric shocks by jumping over a low partition. For the most part, the Group 3 dogs, who had previously "learned" that nothing they did had any effect on the shocks, simply lay down passively and whined. Even though they could have easily escaped the shocks, the dogs didn't try.
----
"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."
I love this statement. I'm absolutely sure that the majority of theories to do with psychology/economics are based on intuition, much more than they are based on "hard facts" (because it's very hard to get hard data on these kinds of things). I'm happy he at least admits it.
There have been some poverty studies in India that shows that the lack in belief that "things could be different" may be the cause of some irrational behavior.
What I wonder from the article is what happens if you take a poor person and pay off everything and get them started with an education. Do they fall right back into debt? I have always suspected that having a child while a teenager is too big of a cost to dig your way out of.
This may not translate well into the U.S., since India has a history of a strong caste system that enforced poverty. "Things could be different" was not true for the Harijans.
That was part of the study. Researchers observed more irrational actions compared to say rural china or vietnam. Having that feeling that things wont change will cause you to give up and do what is deemed irrational.
Most of the social help programs that I have seen so far, except for unemployment, are overrun by scammers. I lived in a section 8 apartment for a while and the same people qualifying for $25/month rents were driving Escalades. For these people there is nothing at this point in their lives that is going to change they way they live and think. Educating their kids is the only way to break the cycle of poverty.
I can't say I have done a formal study, it is just an observation in a single city. The Mint Blog published some numbers on illegal immigrants where it was claimed that over 60% of section 8 was claimed by them. Most of them get paid in cash so it is easy to adjust whatever they make to meet the section 8 qualifications. Also a lot of the households have more than one adult working so going over the $30k qualification threshold doesn't take that good of job if it is split between 2 or 3 people.
There are definitely people that have fallen on hard times and people on disability that needs the help section 8 provides, it just makes me angry that they are in the minority of people being helped.
I don't know what it's like in the US, but here in Sweden unemployment is a high risk low return program to scam. You have to show up to regular meetings and show that you are actively looking for work, and if you're really unlucky the unemployment office will actually find you a job that you have to take or risk loosing unemployment. So as such you are much better scamming things like medical disability, which is at least as much money but a lot less work on your part.
Every time (moderate hyperbole) one of my pizza drivers (I did that for 7 years) would deliver a pizza to either a trailer park or a ghetto... there'd be a 52" plasma sitting in the living room.
And then they'd apologize for being too poor to tip.
Poverty will always exist, because poverty in its truest form is the perception of inequality.
As timwiseman said:
>With that said, the close tie in to material wealth is your place in society. A good hunter-gatherer might have none of the luxuries we take for granted now, but he probably has the respect of those around him and looks around and sees he is well off compared to his comrades. He is likely to be happy, and to feel that his work is paying off.
Imagine a world where every citizen was equipped with one spoon. They only needed one spoon, and they only ever used one spoon. Now say a few citizens acquire _two_ spoons. They never use these spoons, and they don't need them. But suddenly, everyone who only has one spoon starts to feel inferior.
If we woke up tomorrow and everyone had the same amount of wealth, it would be necessary to redefine poverty. The feelings that accompany poverty would still exist, albeit for a different perceptible difference between people.
I think the sort of poverty I sense around big company development is of the same sort. Employees are often beset by clueless management, crushing bureaucratic paperwork, WTF bad code, useless demoralized coworkers, &c...
This results in people saying stuff like, "If you find yourself in a warm tub of shit, just have the good sense to stay there where it's warm and no one's likely to attack you." Yes, I actually had a coworker say that to me once.
The attitudess of such workers are very much like the attitudes of those in poverty as described by the article.
First, let us correct your assumptions: Very few Americans get out of poverty. Social mobility rates are surprisingly small in the United States. The American Everyman is very likely to die in the class into which he was born.
Secondly, not falling into poverty in the first place really is a question of help. Wealthy people (read: almost all HN users) have networks of wealthy people to assist them when times get hard -- parents, children, siblings, friends.
The poor do not. Poor folks have networks of other poor folks. If I lose my job and my house, I have a year of cash and goodwill to live on, couch-surfing and stretching savings. If a member of the working poor suffers a setback on the way out of poverty, he could be back to square one, or worse, in a matter of weeks.
Very few Americans get out of poverty. Social mobility rates are surprisingly small in the United States. The American Everyman is very likely to die in the class into which he was born.
No, that is true. Canada is comparable in almost every way to the USA, and yet social mobility is much higher in Canada. And it is higher still in the Scandinavian countries.
It's tempting to attribute this to social programs like medicare (which explains Canada and Norway), but England has a similarly lower rate of social mobility, despite being very comparable to Canada.
This is just my speculation, but social class systems may also be a factor. The English class system is legendary, but Americans may not appreciate how stratified their society really is.
(For what it's worth, I just happened to have these references because I was arguing on Reddit with an anarchist who asserted there was no social mobility under capitalism. There is, but not as much as there can be, especially in the USA.)
Moving between quintiles is more frequent in the middle quintiles (2-4) than in the lowest and highest quintiles. Of those in one of the quintiles 2-4 in 1996, approximately 35% stayed in the same quintile; and approximately 22% went up one quintile or down one quintile (moves of more than one quintile are rarer). However, 42% of children born in the bottom quintile are most likely to stay there, and another 42% move up to the second and middle quintile. On the opposite end of the spectrum, 39% of those who were born into the top quintile as children in 1968 are likely to stay there, and 23% end up in the fourth quintile. Children previously from lower-income families had only a 1% chance of having an income that ranks in the top 5%. On the other hand, the children of wealthy families have a 22% chance of reaching the top 5%.
According to one study, the income of a person's parents is a great deal more predictive of their own income in the United States than other countries. France, Germany, Sweden, Canada, Finland, Norway, and Denmark all have more relative mobility than the US, while only the United Kingdom is shown to have less mobility.
The exact degree of economic mobility might be a point of contention, but I see very little merit in the statement that "very few Americans get out of poverty" or "The American Everyman is very likely to die in the class into which he was born." The data says otherwise.
It's relevant because we're talking about poverty in the context of policy and values, and if the US is falling short on poverty metrics compared to the rest of the developed world, then it's evidence we're doing something wrong.
This statement is deceptive -- it conflates movement into the second and middle quintiles.
The second quintile of American income is still very, very poor: $18k-$35k of household income. The median household is three people, with only one wage earner. (The second quintile of individual, wage-earner, income tops out at less than $25k.)
Movement from abject poverty into the second quintile is quite common. (Movement in the other direction is also common.) Going from zero to one wage-earner in a household can make that difference. Moving from destitution up to the middle (3rd) quintile is a much more difficult road.
It seems like you're using a fairly mutable definition of "poverty" that you can push around to suit your needs. Now people have to move from the lowest quintile to the middle quintile to meet your definition of "escaping poverty"?
I also find it interesting that almost 50% of households in the lowest quintile own their own homes. And the 2nd and 3rd quintiles have nearly 60% and 70% home ownership rates, respectively. Now, I'm not arguing that owning your home means you're not poor, but I think characterizing the 1st or 2nd quintile as "abject poverty" is a bit of a stretch. Here's an interesting paper on what poverty in America actually looks like:
I have friends in the second quintile and they're anything but destitute. $35k is only impoverished if you live in a city or urban area. Living expenses are much lower in most of America.
I guess that's only true if you already own a place to live in.
I would do really well on my current wage if I owned a place, but since I don't, I have to spend between a quarter and half my earnings on a place to live in (I still live way better than the average Uruguayan).
In the USA I think $2k/month for a single person, who had the foresight and willpower to not get married (yet) and not make babies (yet) is actually quite livable and hardly poverty.
Might be worth noting that if you look at a place where a person's income is a function of their productivity (i.e., smart, hard working people make more money on average) then you should expect some stickiness, because one's intelligence and work ethic surely is correlated with the same qualities in their parents (and that's regardless of whether you believe in genes or nurture).
Re: help networks -> poor people might not have a network that can make a house payment for them, but their networks are (IME) more likely to give a hand via couch-surfing and the like.
As a person who grew up poor and made it out of the bottom quintile, I can tell you that the number of my poor friends who had the talent and opportunity to do the same but didn't actually do it is probably an order of magnitude larger than the number who did.
So why don't they actually make it out? The theory in the article sounds interesting, and I hope to see more research done to test it.
This strikes me as very poignant, and makes me wonder about how we form our networks. Why is it that the wealthy know the wealthy and the poor know the poor? Is it usually as simple as the existing networks of your parents that you are born into and then expand upon? Is it school, either college or high school or those who drop out of high school becoming your network depending on how far you go? Is it the who you work with? Is it out and out classist snobbery? Probably all of these things and more wrapped up in one...
By the metric where almost all HN users count as "wealthy", the US hardly has any poverty at all. I don't know that that's inaccurate, but it's not the usual assumption.
interesting story: I lived in Los Angeles from the age of 19 to now age 26. My mother died this past november. Before this had happened, I was living my life in Los Angeles. I had big ambitions and I knew where they were taking me. Work was in abundance, during which I had been working for myself for three years developing websites, and working on my startups. It was picture perfect in ways that work would come to me.
Now, I live in Sherman Texas, A very small town where I grew up and once dreamed of big things, expensive things which would become mine to keep. The loss of my mother was very difficult, yet I have now opened a new candy store, and leased a large office loft downtown. I've gone through every penny in the transition. One of the most important things that I realize now is that- things in life do not last, whether it be riches of material wealth, love, spirit, or my own motivation. One thing can I can be certain of is my own mindset, temporary defeat, and a loss of hope- or the ultimate poverty.
I currently have a broke down car that beeps as I drive it as if it were a time bomb, too much office space, and an inheritance of real-estate that has become a burden in expenses that I can no longer keep up with. Every new project that comes my way somehow disappears before my eyes (I've never had this much trouble closing a deal).
If you are poor, look up, you're still alive. This life is a series of challenges, breath a fire that ignites your soul. Live to have hope, and continue dreaming. The difference between the rich and the poor is ones drive to act upon a dream, and fight without a moment of doubt.
The poor now, and the poor tomorrow are two different people, the ones who lift their own spirit, and the ones who drown in their spirit of misery.
Bee stings is a bad analogy. It's more like trying to retain and adapt human dignity among exponentially more inefficient human processes. I agree with this article only insofar as multiple bee stings are exponentially more painful. But I disagree with it insofar as bee stings represent 'pain' instead of logistical nightmares and high risk situations, which is what poverty, the further down you go, increasingly involves.
I also disagree strongly that poverty leads to irrationality. That is a very dangerous and arrogant line of thinking -- and obviously reflects a lack of understanding with the rational choices poor people face.
My take is that irrationality (by somebody) or bad luck (by somebody) leads to poverty. Which leads to more irrationality. Which leads to more poverty. And so on. It can be a vicious cycle that is hard to escape from, mentally and financially.
The theory of "car dent" and "no of dishes in sink" are kind of justified but the "protagonist" of the article i.e. no of bee stings does not fit with the theory of poverty at all. Does not matter if someone has one or ten bee stings, people get it cured for sure.
Suppose you get X bee stings (problems) in one day, and you have a bee string rate of Y per day normally. If you can only afford to buy cures at a rate of Z per day (let's be optimistic and assume it's greater then Y) it will take you X-(Z-Y) days to cure all your bee stings.
Now, a bee sting sucks, but it doesn't kill you. In fact, life without any bee stings is, let's say, Q times better then with. Yet, the difference between 1 bee sting and N bee stings is pretty much nil, they all hurt. The only real benefit occurs when you cross the threshold that lets you have no bee stings at the end of each day.
The theory, as I understand it, proposes that given a big enough X, a person with a small (Z-Y), won't bother with curing bee stings, regardless of Q.
My comment was meant for the literal meaning for "Bee sting". What if I replace "bee sting" with a "cut finger". You will say whether it is one finger off from your body or 10 fingers off... it hurts the same!!!... so no need to pay attention.
In theory your/author's logic sounds good... but practically it does not make sense. I would still say that the analogy of car dents OR no of dishes in the sink is a better way to present it. Its a little impractical to count "physical/bodily" pains in numbers.
You may or may not do it, depending your discount rate.
Suppose being bee-sting free is worth H dollars/day to you, and the cure costs C dollars/day. As long as C/H < exp(-r( days until fully cured)) (where r is your discount rate), you'll buy the the cure.
Since r tends to be larger for the poor than for the middle class/rich, C/H is likely to be less than exp(-r(days until fully cured)), since the larger r gets, the smaller this constant gets. This is just standard econ, BTW.
I didn't really understand this bee metaphor either. The last few times I got stung, I just waited until it stopped hurting. If I got stung all at once by a swarm I'd probably seek medical help. If I was getting regularly stung then I'd probably spend some time planning how to change whatever in my life was causing me to be repeatedly stung.
The car one made more sense, similar to the broken window theory, you'll be more careful and quick to fix the first problem if you have no other scratches and dents and grow ever less careful if they start to mount up and you don't have the time/resources/money/ability to get them repaired.
I didn't like the bee metaphor at first, but I think it's actually fairly accurate. In real life, I keep bees in my backyard, and periodically am stung while tending them, usually when I do something wrong (not enough smoke, working into evening).
While being stung hundreds of times might be life threatening, what's probably not apparent is that being stung once and being stung 6 times causes approximately equal physical discomfort. It's really the worst sting (the one on your hand or face) that bothers you. It overshadows all the others.
If you were to ask: how much would I pay to have gotten one sting less, that number is very different for the first sting versus the last. This is his metaphor: how hard would you work if you were still going to have lots of pain outstanding when you get your paycheck?
The other part of the metaphor, which I don't think he intended, has to do with the acceptance involved. I realize that when I get stung by a bee on the back of my hand, it will swell up and leave my hand mostly unusable for a couple of days. Despite this, I keep bees. I think there is some deep rich vs poor metaphor here.
Lots of great comments here. I tried to refrain from commenting but it is a topic close to my heart.
I would simply add that as somebody who has been poor and upper-middle-class, and switched back and forth repeatedly, that there is a difference between poverty and despair.
Anybody can get poor. Some folks who are poor can get out of it given the right conditions, but folks who have given over to despair cannot get out of it, no matter what you do for them or what the conditions are.
People pass from poverty into despair very easily, unfortunately. This is closely related to the "what kind of reality do you want to live your life in?" question, where the issue is not what the externalities are, but rather what types of things do you want to assume and keep in your heart -- that working hard has it's own merit, that being honest is a better way to live, that educating yourself makes for a richer life, that trying new things can lead to good results. These may never ever be proven by personal experience: in fact, for many poor people it will all just result in more of the same. But by believing them, as a group, the group does better than by not believing them. The belief has an effect of its own.
Poverty is the realization of the 2nd law of thermodynamics as applied to economics. The easiest way to become poor is to do nothing, it works almost every time.
>> Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices.
I think the lack of smartness is what makes people poor. I heard lot of stories of people who inherited millions and finished as poor as a blue collar employee.
For example, I had $4000 debt. There was no way in hell I could ever pay that money back, considering that I made $900/month which did not cover my monthly expenses. So let's say a month ends where I spend $800 and only have $100 left. Am I going to stick it towards paying off the debt or just buy some new shoes or so? That debt is so huge that I know that saving $100 will still take me so many years, that I just accept the debt and go buy myself some shoes.
Poverty starts when you resign yourself to being poor. A friend of mine is poor - I called him to lunch and brought out $5000 and I told him that if he can think of any idea at all for a business, I would invest these $5000 in his business. I would not check his idea, I would not bother him if it was viable, I would simply give him the money.
Up until today, he has not come to me to pick up the cash. But he still complains about how he has no money. That's the thing - he is resigned to being poor. Becoming rich will mean a lot of work, it's an ardous and long task, and I really don't think he wants to do it, even when the money is offered to him in that manner.