Now that I’ve sketched The Persistence of Poverty, how does it stand up?
The Right
1. Karelis blames persistent poverty on persistent poverty-inducing behavior: not working, not finishing school, not saving, abusing alcohol, committing non-lucrative crime. While his evidence is a bit thin, almost everything else I’ve read on poverty confirms that such behavior (plus impulsive sex) is indeed one of poverty’s chief causes.
2. Karelis says that, contrary to standard economic theory, marginal utility is often increasing (and marginal disutility is often decreasing). He produces several convincing examples, mostly involving the alleviation of pain (bee stings, foot blisters), but also consumer products (like scratches on a car). He could easily have produced numerous other examples of increasing marginal utility. Any “acquired taste” works. Almost all hobbies – everything from baseball to opera, chess to stamp collecting – become more enjoyable as you learn to appreciate their subtleties. The same goes for friendship and love; they’re often awkward at first, then become increasingly enriching… at least for a while.
The Wrong
1. Karelis has a clear story about when utility is decreasing and when utility is increasing: utility is increasing for “relievers” but decreasing for “pleasers.” For all its clarity, however, Karelis’ story is doubly wrong.
He’s wrong on relievers; it is child’s play to list important examples with decreasing marginal utility.
We normally take our vision for granted, so fixing blind eyes is a clear-cut reliever. Now suppose you choose between: (a) one good eye for sure, or (b) a 50/50 gamble between normal vision and blindness. Karelis’ story implies that most of us would choose (b)!
If that seems extreme, sleep is another clear case of a reliever. Now suppose that tonight you choose between (a) sleeping seven hours a night for the next eight days, or (b) sleeping eight hours a night for seven of the next eight days, and sleeping zero hours on the eighth day. Karelis’ story again implies that most of us would choose (b)!
He’s also wrong on pleasers. As mentioned, most hobbies have increasing marginal utility. Many luxury experiences – clear examples of pleasers – are ruined by one salient flaw. Karelis mentions scratches on cars, but we can say the same about getting a sunburn on a tropical cruise, lacking alcohol at a party, or watching a movie on a screen with a single stain on it.*
2. So what? If lots of relievers have decreasing marginal utility, and lots of pleasers have increasing marginal utility, we no longer have much reason to think that the poor are more likely to encounter increasing marginal utility than the rich. As a result, Karelis has little reason to predict different behavior for the poor and the rich. And different behavior for poor and rich is exactly what his theory is designed to explain!
3. Karelis loves talking about the impoverished ancient Lydians, who were so poor that they only ate every other day:
[L]ike many poor people today, the Lydians allocated their meager resources unevenly between time-slices of themselves. If we assume that “severe famine” means a condition where luxurious consumption cannot be achieved even by saving, their pattern must have been “skimp a little/skimp a lot”: eat no more than enough one day and nothing the next. Further indication of their preference for uneven consumption is the very fact that what they used to distract themselves from hunger were games of dice and similar games. Assuming they gambled on these games, and that they staked their meager holdings, the result for the individual would have been further oscillation in consumption, over and above the practice of eating on alternate days.
Again:
But there are worse things than having some days of deep poverty. For instance, there is having twice that many days on which the poverty is half as deep. That again is the point of Lydian prudence.
On reflection, however, the Lydians are a bizarre outlier at best. Where on Earth do poor people regularly choose to starve on alternate days? How many poor people who can afford a cheap permanent address choose instead to oscillate between homelessness and a comfy hotel room? Actual behavior of the poor closely fits the standard economic model of decreasing marginal utility: The poor eat cheap meals on a daily basis, and reside in cheap apartments on a monthly basis.
4. Increasing marginal utility fails to explain why the poor don’t save. Karelis’ model could just as easily predict that the poor will deprive themselves in the present in order to binge in the future. (He does mention the poor saving for festivals, but still treats non-saving as the norm).
5. Increasing marginal utility can explain why the poor steal, rob, and deal drugs more; the average earnings may be low, but the variance is high. However, increasing marginal utility does little to explain why the poor commit more crimes of pure violence, drunk driving, vandalism, and other offenses that almost never lead to financial gain.
6. Karelis is highly confident that unconditional transfers increase work effort. Virtually no empirical researcher shares this view; they argue about the magnitude of the disincentives, not the sign. In any case, you don’t need empirical research to see the absurdity of Karelis’ position. If unconditional transfers increased work effort, then current recipients of these transfers – many of whom don’t work at all – would work even less if the government cut them off completely. Are we really supposed to believe that able-bodied welfare recipients would voluntarily starve to death – and watch their children starve to death – rather than work at McDonald’s? Indeed, Karelis’ model predicts that when famine strikes, people will struggle less aggressively for food than they do during normal times. Not what we see in the real world, at all.
7. To his credit, Karelis open-mindedly invokes the reader’s introspection and the testimony of the poor as evidence. Yet both introspection and testimony strongly contradict his idea that the poor are so miserable that more responsible behavior would barely help them. Most obviously, every book I’ve ever read on single mothers says that being poor with a child is much harder than being poor without a child. Poor childless single women only have to do one job to take care of themselves. Poor single mothers have to juggle two jobs – their paid work and their parenting. Poor childless single women who are down on their luck can just move back in with family. Poor single mothers who are down on their luck have to find a relative willing to take them and their kids. Poor childless single women have to get to their job on time; poor single mothers have to coordinate their work commute with their kids’ commute to day care or school.
The same goes, of course, for combining poverty with a drinking problem. The non-drinking poor just have to get to work and pay the bills. The drinking poor have to avoid getting fired despite drunkenness, hangovers, and so on. Similarly, consider the volatile combination of poverty with crime. The law-abiding poor just have to get to work and pay the bills. The law-breaking poor have to evade the police and dodge bullets.
In all the ethnography I’ve read, I can’t recall a single example where a poor person said that any one of their problems was “no big deal, because they had so many other problems,” or “a few extra dollars a month would barely make a difference.” One of the best treatments, Edin and Lein’s Making Ends Meet, shows that poor women energetically supplement their main income sources – welfare and legal work – with small sums from family, ex-boyfriends, current boyfriends, illegal work, and charity. If Karelis were right, why would they be so eager for a few extra bucks?
The Overstated
1. Karelis criticizes almost all competing theories for lack of parsimony, which he regards as a dire intellectual fault: “Unusual tastes and preferences, whether located in the individual or in the culture to which the individual conforms, are precisely the sort of variable we should try to omit from our explanation of poverty, absent overwhelming evidence for them.” (emphasis added) Yet on reflection, we can easily make competing theories elegantly parsimonious. Instead of saying, “We have one theory for poor people, and another for everyone else,” why not just say, “Whatever causes persistent poverty is a continuous variable”? Thus, if laziness causes persistent poverty, you don’t have to say that the poor are lazy and everyone else isn’t. Just say that everyone is lazy to some degree, but the poor are lazier. If impulsiveness causes persistent poverty, you don’t have to say that the poor are impulsive and everyone else isn’t. Just says that everyone is impulsive to some degree, but the poor are more impulsive.
2. If I were Karelis, I would downplay the importance of parsimony. After all, his theory is so complicated that it takes multiple blog posts just to explain. In contrast, I was able to run through his six competing theories in a single post.
3. Intellectual salesmanship aside, persistent poverty really is a complicated problem. Embracing any one explanation, however “parsimonious,” is awfully dogmatic. Thus, suppose that Karelis’ story made perfect sense. He would still need to acknowledge a major role for what he calls “restricted opportunities.” The poor have lower IQs, worse health, and less inherited wealth. Housing regulation forces them to either live in low-wage areas or spend most of their money on rent. Indeed, if you take a global view, most of the poor can’t even legally work in the First World. Similarly, even if Karelis’ story made perfect sense, he would still need to acknowledge a major role for preferences. Some people dislike working more than others. Some people like alcohol more than others. Some people have more violent tempers than others. All of these preferences – and many others – tend to make you poor. Obviously.
* Yes, you can try to redefine luxuries as relievers, but only by making Karelis’ theory tautological. “Things that relieve discomfort have increasing marginal utility” is supposed to be an empirical claim, not a definition.
READER COMMENTS
KevinDC
Aug 13 2019 at 11:47am
One point I could quibble with. Bryan says:
I certainly have lived many years of my life as a low income person, and was in pretty close company with lots of poor people, and I heard that very sentiment expressed a lot. Granted, it wasn’t quite phrased that way. It was usually along the lines of “What’s the point? Even if I fix that, everything else in my life sucks anyway so why bother?” Granted, I never understood that mindset – it always seemed extremely short sighted to me, but it was definitely very common.
The impact of that mindset makes a huge difference on a thousand different margins, though. One example that comes to mind – it’s a bit of a cliche that the reason the poor eat such unhealthy food is because it’s too expensive to eat healthy. But that’s just not even close to true. I probably ate my healthiest diet when my income was lowest because that was my cheapest option. For example, for the same amount of money that you could buy a single bag of Doritos, you could also get a couple of pounds of lentils, which are much healthier, more nutrient dense, and will feed you for a lot longer. But when I suggested things like that to my peers, they would react with such horror you would think I suggested they sell their souls to Lord Racist Satan. The response was always some version of “But I don’t want to eat stuff like that.” Yeah, neither did I, but so fricking what?
nobody.really
Aug 13 2019 at 12:30pm
That’s a fair statement about the money involved. But a lentil diet also requires an investment of time, equipment, and skill. I prepared a lentil dish without a sufficient investment of time and skill (without adequate soaking)–and it damn near killed me. And the flatulence really inconvenienced my roommate.
The same was not true when I simply ripped open a bag of Doritos. Well, less true, anyway.
Just saying, there are many kinds of expenditures to consider.
KevinDC
Aug 20 2019 at 11:40am
True, it’s tricky to capture the full extent of the situation in a single quick example 😛
And in fact the conversations were usually more involved than that. For example, I didn’t just mention lentils vs chips. I also mentioned a recipe I frequently made (and believe me, got so freaking sick of!) where at the start of the week I’d make a giant batch of lentils mixed with diced potatoes and red beans. Or sometimes it was long grain brown rice instead of lentils. Depended on how adventurous I was feeling. But anyway, the point is, each of those ingredients could be found for under a dollar a pound. So for just a few bucks of time and a couple hours of cooking, I could feed myself for several days. When I suggested my peers try it too, they would respond not just that they don’t want to eat food like that, but also that it takes too much time. I never found that convincing either – they always had time to keep up with The Bachelor and Scandal and binge whatever the favored Netflix series of the moment was. If there is a cheap and easy and healthy option available to you and you refuse to take it because it might mean sacrificing an episode or two of a TV show…well, that’s your call, but I’m not going to have much by way of sympathy or patience.
nobody.really
Aug 13 2019 at 12:50pm
I hadn’t reflected on this as a form of increasing marginal utility. Some thoughts.
1: Even with beloved hobbies, I expect people reach a point of diminishing marginal utility. Even the greatest opera aficionado will reach a point when she says, “no more!,” even with very good productions. (Then again, Wagner’s Ring Cycle goes on for 15 hrs, so maybe I’m mistaken…?)
2: To move about as off-topic as you can get, I speculate that automation will eventually result in a world of vast wealth, of surplus labor/surplus leisure. In such a world, adaptive behavior will not consist of zen-like self-denial, but in zealous pursuit of ever-more exacting refinement. The most adaptive person will be the one who, awash in goods and services, will not become sated, but rather can discriminate and continually find satisfaction in discovering the FINEST goods and services.
In short, that judge-y, prickly, pain-in-the-ass friend of yours? He’ll be the dominant life form of the future.
Dylan
Aug 13 2019 at 3:11pm
First thing, I wanted to take this opportunity to tell you how much I generally enjoy your posts. I find that they are insightful, witty, and come at things usually from a perspective I haven’t thought of. Normally I have nothing to add, but your posts do make me kind of wish for a “like” button (even though I kind of hate like buttons).
I certainly agree that hobbies reach a point of diminishing marginal utility, and personally I think that point usually comes pretty quickly. I think back to learning to snowboard, where even though I was falling all the time it was still enjoyable just because I could see my progress so quickly. Now that I’ve done it long enough that I’m no longer getting better, it is a lot harder to get that enjoyment, and I’m much, much pickier about the conditions. If I can go on a sunny day, where the temperatures stay around 25, and it is the day after the mountain got 18″ of fresh snow…sure, then it is a lot of fun…but everything else is kind of a let down.
nobody.really
Aug 14 2019 at 10:42am
Wow–thank you. What an extraordinarily kind thing to say.
Andre
Aug 13 2019 at 2:47pm
Barring unusual exceptions such as wealth destroying accidents, doesn’t poverty (in Western societies with public education) boil down largely to (lack of ) conscientiousness, one of the Big 5 personality traits? Kevin’s example above is apt: the healthiest food is also the cheapest.
Weir
Aug 13 2019 at 4:54pm
Mary Boone: “Get them into debt. What you always want to do as an art dealer is to get the artist to have expensive tastes. Get them to buy lots of houses, get them to have expensive habits and girlfriends, and expensive wives. That’s what I love. I really encourage it. That’s what really drives them to produce.”
That was her model, and it got results.
John Alcorn
Aug 13 2019 at 5:57pm
Bryan,
As Karelis and you note, “unusual preferences” are a standard explanation of behaviors that cause poverty.
“Mental illness” is another standard explanation of behaviors that cause poverty.
You—building on Thomas Szasz—interpret most of mental illness as extreme preferences.
Scott Alexander makes a case that you’re mistaken about mental illness.
Might your new research about poverty be an apt context for a rejoinder to Alexander?
PS: Your critique of Karelis is very helpful. Thank you for the book club!
John Alcorn
Aug 13 2019 at 9:49pm
Bryan,
Various threads in the book club about Persistence of Poverty prompt me to raise a question about a possible tension between your recent book, The Case Against Education, and your new book project, Poverty: Who to Blame.
In chapter 6 of The Case Against Education, you argue that subsidies for education beyond literacy and numeracy (algebra) are socially wasteful because higher education is mostly signaling, and “signaling is a redistributive game.” (p. 187)
A number of commenters in the book club have suggested that social transfer payments to the poor might be justified simply because redistribution enables the poor to consume more, even if Karelis’ claim that subsidies to the poor have positive work incentives is mistaken.
Might your signaling model of education provide a specific rationale for redistribution to the poor? Insofar as the poor are poor because they didn’t finish school, ‘redistribution to the poor via means-tested public subsidies’ might right the wrong of ‘redistribution to the educated via (subsidies to) signaling in the labor market’.
Or does this scenario amount to parody in politics of the theory of the second best in economics? “In theory, at least, it may be better to let two market imperfections cancel each other out rather than making an effort to fix either one.”
Mark S
Aug 14 2019 at 2:45am
Matt Bruenig argued that people have been getting more education, and it didn’t fix poverty.
Why Education Does Not Fix Poverty
https://web.archive.org/web/20151205055251/http://www.demos.org/blog/12/2/15/why-education-does-not-fix-poverty
nobody.really
Aug 14 2019 at 11:16am
As we come to the end of this discussion of public policy and poverty, let me suggest one thought that didn’t really fit elsewhere.
Q: Who demands anti-poverty programs? Who is the “customer”?
A: Mostly the non-poor. The poor generally lack sufficient clout–political or otherwise–to promote their own interests.
For example, consider how much the U.S. Dept. of Human Services spends on the Supplemental Nutrition Assistance Program (SNAP a/k/a food stamps): nothing. That’s ‘cuz SNAP isn’t a program of HHS; it’s a program of the Department of Agriculture. That is, SNAP is a program designed to create more markets for agriculture products. The fact that it helps poor people is incidental. This is demonstrated by the fact that every time the Department of Agriculture’s budget gets squeezed, the first thing they propose to cut is not farm subsidize or ethanol subsidies, but the SNAP program.
Thus, at least to some extent, the goal of anti-poverty programs is really to assuage the concerns of the non-poor. Humans are social animals. Their utility functions include some aspects of their perceptions of the welfare of their neighbors. And there are two strategies for managing these perceptions. One is to help the poor. Another is to hide the poor so that they are out of sight and out of mind. Thus zoning laws and segregated schools and anti-panhandling policies and ….
In contrast, libertarians often argue for poverty programs as if the only goal were to help the poor. Thus, they advocate free(r) borders and lower public assistance. This would seem to be a formula for maximizing both the number of poor people entering the US, and the conspicuousness of poor people. I humbly suggest that, whether or not this policy would maximize help to the poor, it would minimize the chances of being adopted because it would not address the needs of the non-poor–and they are the people who make the policies.
It’s lovely to visit Disneyland. But Disneyland requires 1) a high admissions fee to raise revenues and limit admissions to only those who can afford it, and 2) strong walls to keep out those who can’t afford it.
John Alcorn
Aug 14 2019 at 2:29pm
Your comments are incisive, re: political economy of public policy about poverty.
In some historical contexts, it seems, the establishment or mainstream voters support redistribution to the poor partly because they fear of unrest by the poor.
David S
Aug 14 2019 at 6:33pm
Another possible issue with this take on poverty is the question of granularity. For example, the poverty line in the US is $12,000/year. How many people have a $12,000/yr job? That is $6/hr, which is illegal and fairly unlikely. So what is likely the majority case is that people either have a job or don’t have a job, or in the case of an income more than $0 and less than $12,000 they have a job for only part of the year. In other words, below $12,000/yr most of the income levels cluster around zero for a given partial year and much higher for the other part of the year.
If the issue is have job or not have job, then the 6th insect bite analysis fails to hold. Now it is re-framed as a single point of pain, driving the impoverished to get a job and avoiding this issue.
Hazel Meade
Aug 16 2019 at 4:51pm
It occurs to me that the idea of disincentives caused by increasing marginal utility could be interchanged with that of hedonic adaptation. How do we know that the poor are disincentivized from pursuing “relievers” instead of adapted to the non-reliever condition? I.e. maybe you’re just adapted to having 6 bee stings all the time so zero bee stings just doesn’t seem like much of an improvement.
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