Bryan Caplan  

The Power of Personality: What Happens When You Give a Homeless Man $100k?

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The homeless are different from you and me, and it's not because they have less money. It's because they are extraordinarily low in what personality psychologists call conscientiousness. That's my theory, anyway. A quite watchable documentary on Showtime (and that's high praise from me, I strongly prefer fiction) puts my theory to the test. It's called "Reversal of Fortune," and it's got a simple set-up: The film-makers picked Ted, a homeless man in Pasadena, gave him $100,000, and filmed the results.

We initially see Ted's life on the streets. He sleeps under a bridge and does enough recycling to pay for beer, cigarettes, and a little food. He is surprisingly articulate - low IQ is not his problem. It would be easy for someone to argue that Ted has simply been unlucky, and that his drinking is "just a response to the hopelessness of his situation."

Then he gets $100k. He starts off with some reasonable purchases: He gets a new bike with a trailer for transportation, checks into a motel, and gets cleaned up. But that's as far as it goes. Once he's got his basic needs taken care of, Ted starts blowing through his fortune at high speed: A brand new truck, extravagant gifts, and daily carousing at the bar with fair-weather girlfriends. So much for drinking being a response to hopelessness!

Ted keeps muttering about how he should get his (horrifying) teeth fixed, but doesn't even schedule a dental appointment. Family members nag him to be more prudent, but he stubbornly declares that he lives day by day. After six months, he apparently stops cooperating with the film crew - they can only guess that he's just about broke.

Frankly, I think Ted did better than most homeless people would have. But his story helps explain why there is so much redistribution in kind. If Ted were just given vouchers for a modest apartment and a daily buffet meal, $100,000 could have lasted a decade. Well, that's optimistic: He probably would have traded access to food and shelter for liquor, and gotten evicted once the neighbors started to complain.

Libertarians have occasionally offered their critics the following deal: We'll support a one-time Equalization of Wealth, if you agree to abolish the welfare state. I'm not surprised that no one has taken the bait. Most poor people aren't as dysfunctional as Ted. But deep down even bleeding hearts subscribe to my insensitive theory that - at least in the First World - ordinary prudence is enough to keep almost anyone out of poverty.


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COMMENTS (27 to date)
SheetWise writes:

"But his story helps explain why there is so much redistribution in kind."

Redistribution?

If you're talking about wealth or income, that presupposes that they were initially distributed. I hate to break this to you, but they aren't -- they're earned.

You must have been referring to the spoils of the class war -- in which case they are simply distributed, not redistributed.

Robert Wade writes:

Claiming that personal issues and poor character is at the root of poverty in the United States is misguided. Such an assertion may be suitable for explaning the homeless, but more important is the less-visible poverty.

The single mother, the low-income service worker, and the immigrant all are poor and exist in much greater numbers than the panhandler. Would you assert that such people are in poverty due to a deficit in character?

If you seek to discredit the explanation that poverty is structural and arises from the economy itself you cannot do so with your evidence being a Showtime movie about a homeless guy that blows through some cash.

Dezakin writes:

"If you're talking about wealth or income, that presupposes that they were initially distributed. I hate to break this to you, but they aren't -- they're earned."

Paris Hiltons and other children born to the wealthy are extreme examples, but by and large your earning power comes from your parents; From the quality of schools they can afford to the environment provided during formative years, you need initial investment in human capital to earn anything at all.

"If you seek to discredit the explanation that poverty is structural and arises from the economy itself you cannot do so with your evidence being a Showtime movie about a homeless guy that blows through some cash."

It does seem that Brian wants to feel justly entitled to his good fortunes and his ideology.

You'll notice that the countries with the most intragenerational social mobility are those with generous public finance of education. There is far more social mobility in sweden than in the US.

But, Brian can comfortably watch showtime and be assured that the poor have only themselves to blame.

SheetWise writes:

Dezakin -

You observe that often times children are the beneficiaries of good economic decisions made by their families. So what? The families have earned it, and it's theirs to share. The fact that Paris Hilton is a dead end investment and that her parents might have realized a better return in Enron doesn't change that.

Human capital is built people who apply themselves to saving, not by people waiting for others to make deposits.

Brandon Berg writes:

Robert:
The primary cause of poverty in the US is people having children they can't afford, which is why single mothers is the first example that came to your mind. How is this not a sign of inadequate conscientiousness?

Omer K writes:

"The single mother, the low-income service worker, and the immigrant all are poor and exist in much greater numbers than the panhandler. Would you assert that such people are in poverty due to a deficit in character?"
=---------------------

The socialists have come out in force for this one.
The single mother... why is she a single mother? I suppose she got pregnant like the Virgin Mary? Why wasnt she more circumspect about whom she slept with?

The low income service worker and the immigrant (assuming he or his children do not get out of poverty in a generation or two) share the trait of low iq, which is correlated with low conscientiousness.

"by and large your earning power comes from your parents; From the quality of schools they can afford to the environment provided during formative years"
=-------------------------------
Someone, and Im not going to say who, was unwilling to read the hard stats from the NLSY in the Bell Curve. Necessary I suppose so they can keep joyously bleeding from their heart.

Rick Strange writes:

"Claiming that personal issues and poor character is at the root of poverty in the United States is misguided. Such an assertion may be suitable for explaning the homeless, but more important is the less-visible poverty."

Ah, yes. Invisible poverty.

The cure for invisible poverty is an invisible welfare state.

"If you seek to discredit the explanation that poverty is structural and arises from the economy itself you cannot do so with your evidence being a Showtime movie about a homeless guy that blows through some cash."

Compare North Korea with South Korea, or Cuba with Miami, or Alberta with Montana. Historically speaking "poverty" is the natural state of man. But with the advance of science and its handmaiden, technology, the root cause of poverty these days is structural, and involves the heavy hand of state compassion.

Ronnie Horesh writes:

I think many of us are privileged without knowing it. We take for granted our numeracy, for instance, which tells us clearly that $100000 is (say) 1000 times $100 and that there is such a thing as budgeting; we know that there ways of storing cash that are almost riskless - we are aware of banks, interest rates and investment. We live in a world where, if our assets are stolen, we have a fair chance of getting them back through the law or insurance. I doubt whether any of this applies to the homeless man in the tv show, and I don't think he can be blamed for that.

Jadagul writes:

I think Jane Galt gets this one pretty much right. Most of the poor are poor because they make bad decisions. This is a combination of bad genetics and the fact that they grew up poor in places where they didn't learn to make good decisions. I suspect this is why poor immigrants do so much better two generations down the line than poor natives: the immigrants are poor by circumstance and teach their kids good work habits. The native poor are poor because they lack these habits, and thus don't teach them to their kids.

So poverty is largely a result of bad decisions, but I'm not sure we can step from there to castigating the poor for moral deficiencies. It's at least partly an issue of upbringing and culture. Unfortunately, those are two of the hardest things to change.

SheetWise writes:

"Most of the poor are poor because they make bad decisions. This is a combination of bad genetics and the fact that they grew up poor in places where they didn't learn to make good decisions."

Consider the families and upbringing that produced two US presidents -- Jimmy and Billy Carter, Bill and Roger Clinton. In both families the rogue son had a long history of bad decisions and criminal activity. Both presidential brothers profited handsomely by their unmerited fame and access -- and both squandered it.

Was this bad genetics or bad upbringing?

It's fair to observe what people who are broke did with the last grubstake they had. If they pissed it away, then money clearly isn't the problem or the solution.

From my experience, people who are homeless are there for a reason. It has nothing to do with intelligence or upbringing. Many animals will throw a member out of the pack if its behavior endangers the group -- why should humans be any different?

Nika writes:

Dezakin:

Johan Norberg argues that intergenerational social mobility in the nordic countries can be easily overestimated. This is because of the fact that the sons born at the bottom (into the poorest fifth) earn roughly the same as those born a rung above them (the second-poorest fifth). He concludes that "social mobility in Nordic countries means that people can "earn roughly the same", and yet, can be seen as socially mobile because they have statistically moved to a new income category."
http://www.johannorberg.net/?page=displayblog&month=5&year=2006#1714

So there seems not to be such a lot of social mobility in spite of more equal chances to education.

Larry writes:

It's worth looking at the details here. This guy was at some level rebelling against straight society. He wasn't ready to give up his rebellion, so it made sense that he didn't use his windfall to change his life. He didn't want to change his life.

If instead they had chosen a poor person who had clear goals but was unable to achieve them because of poor earlier decisions (most commonly, getting pregnant before time) the outcome might have been different. Her challenges would have been different. If she left school uneducated, she might not know how to get a bank account. If there was a parasitic male on the scene, the money might just disappear. If she was using, she might just up her dose. But she also might just be stuck, and the money might give her the ability to get unstuck. I think you could find examples of each of these cases and the circumstances would usually predict the outcome.

Half Sigma writes:

Low intelligence, low consicentiousness, and low future time orientation a big part of the explanation for why some people are extremely poor, but a much lesser part of the explanation for why some people are extremely rich.

Mace writes:

"You'll notice that the countries with the most intragenerational social mobility are those with generous public finance of education. There is far more social mobility in sweden than in the US."

Maybe so, but they've got to live under Socialism, so are they really getting ahead?

robert k writes:

There is a lot of talk about single mothers on welfare, or people having children they "can't afford" or before they have the resources. Or that they made "bad choices". It is unfair to force these women to should the burdens.

1) What about the men in these situations?

2) Why isn't there state-sponsored contraception programs or free abortion on demand?

TGGP writes:

Speaking of unwed mothers and abortions, Steve Sailer has pointed out that after Roe v. Wade conceptions and illegitimacy went up and contraception use went down.

Jadagul writes:

SheetWise, I don't think we're really disagreeing. A lot of poor people are poor because of the bad decisions they've made. I'm just pointing out that I grew up in a position that made me much more likely to make good decisions than a lot of those born very poor did.

Larry: I don't think we're disagreeing very much either. You agree with me that there are some poor people who'd throw the money away. I agree with you that there are some who are just stuck and could be helped a lot by a little cash. If anything we're disagreeing about the relative proportions; I conjecture that the first type is an overwhelming majority of the very poor, but that's really an empirical question.

Matt C writes:

I agree that if you are poor in the US, your own choices likely have a lot to do with your poverty.

I do have sympathy for people who have grown up, are trying to be responsible, but are still paying a heavy price for bad decisions made when they were nineteen. It does happen.

One thing that I don't see mentioned often: being poor, at least United States poor, does not have to be that bad. I have a friend who makes $9.25 an hour. His wife does not work and stays home with the three kids. $18K a year for a family of five is below the poverty level. But they have a decent life--I'd rather trade places with them than with some other families I know with 3-4x the income. There is poverty, and then there is squalid poverty. They're not the same thing. Which goes back to the question of personal responsibility, I suspect.

Rick Stewart writes:

Take poor people in the US.

Eliminate those that have low IQs.

From the remainder, eliminate those that are poor for good reasons, poor students for example.

From the remainder, eliminate those that are poor because they can't bother being rich, even though they have the wherewithal (my friend the Cal Tech grad who prefers spending time in the library to working, and therefore eats beans instead of steak, for example).

From the remainder, eliminate the mentally unstable.

How many poor people are left in the US? If the answer is non-zero, let's identify them and give their names to a few NGOs whom I am sure will arrange for the necessary aid out of poverty.

For the others, let´s quit feeling guilty (perhaps some tax credits for work to the first group).

Jacqueline writes:

People keep mentioning "poor" immigrants but please keep in mind that most "poor" immigrants are still much richer in the US than they would have been if they had stayed in their home countries. These are people who did make good decisions and bettered themselves.

Jeff writes:

Wow, brilliant. Based on this one guy, Ted, Caplan makes an extraordinarily ambitious claim. I'm not even sure where to start.

So my response might not be the bleeding-heart one you are looking for, but I have to call to attention a point the author misses. Ted has a disease called "alcoholism." You've probably heard of it. Alcoholism, or "alcohol dependence" as we professionals call it, is a mental illness which compels people to drink heavily despite painful consequences for themselves and, usually, others. Alcoholism tends to lead to impaired memory and judgement, and an inability to make and follow through on plans. Alcoholics do not CHOOSE to have the disease; it is a mental, emotional and physical condition which will usually get progressively worse if not treated. One of the symptoms of alcoholism is a difficulty accepting that one has the condition; this is called "denial." I say all this not because I don't think you know it, but because I don't think the author does. The guy isn't homeless because he isn't "conscientious" enough; his alcoholism impairs his ability to be conscientious.

Note that the consequences of alcoholism differ widely. Upper-income alcoholics have doctors and lawyers who can partially shield them from the consequences of their behavior. When all else fails, they get a few weeks' vacation at a pleasant treatment facility like Hazelden or the Mayo Clinic. Poor ones often find themselves in jails and on the streets.

"Drinking as a response to the hopelessness of his situation" is a strawman argument.

The author mentioned vouchers for housing. Actually, housing voucher programs such as Section 8 have been very successful in helping low-income individuals and families, including alcoholics and addicts, to avoid homelessness. The problem is that there aren't nearly enough to go around. If you apply today you might be faced with a waiting list of two years or more.

I could say much more...one point comes to mind. When a person has been starving for days or weeks, let's say lost in the woods, and then is found and offered food, he or she must be restrained. The natural response to the opportunity to eat is to gorge oneself and get violently ill. So take a guy who has been broke for years, give him a pile of money, and of course you can expect him to spend it.

SheetWise writes:

Jeff -

Ah, yes -- the disease can't be cured, so it should be subsidized. Sorry, Jeff - that is the bleeding heart response.

Before you provide a knee-jerk response to alcohol abuse, do some more research. If you're interested in serious research into addiction or addictive personalities, you're going to have to add a study of spontaneous remission. I think you'll find it's responsible for "curing" more people than any of the "treatment" programs for drugs/alcohol/sex etc. (one reason it's rarely mentioned by those invested in the "treatment" industry, such as AMA).

You'll also have to look at the methodology for determining "success" and use it as a guideline for selecting a control group to make a comparative analysis, since no studies I'm aware of supply their own control groups (with good reason, if they're looking for funding).

Most of what is accepted as "fact" in the disease/cure model, such as the idea that addicts cannot use their drug of choice responsibly or recreationally, should be seen as what it really is -- good advice, not science.

Patrick writes:

Hasn't this experiment been repeated thousands of times, in the form of lottery winnings?

And isn't it an accepted fact that the vast majority of lottery winners have much the same lifestyle 5 years after they win as they did before?

Doesn't this kind of prove the point? In our current society, most poor people don't need more money, they need a clue. (Something that government is never going to be able to provide.)

Garth writes:

Patrick,

Maybe the greatest wastemaker of them all is to think money isn't important.

The poor certainly do need money so do the rich for that matter. However the poor need someone ELSE's money to get rich.

And they can do that by coming with...IDEAS,
that the rich will pay for or lend on.

The government should be in the business of fermenting IDEAS not low income housing, food vouchers and paint by numbers educational systems.

But with one caveat and here is where I agree with you. You shouldn't force money down the throat of people that have no clue.

That's the second greatest wastemaker of them all.

Dezakin writes:

"And isn't it an accepted fact that the vast majority of lottery winners have much the same lifestyle 5 years after they win as they did before?"

I dont know anything about that; I've read the anecdotes from exceptionally imprudent people, but this sounds like projection. Could you cite?

Dennis B writes:

How about a comment from someone who was destined for the welfare state (me!).

I was born so seriously ill that no one thought I could ever live a normal life. I had a disability, but didn't let it bother me. I insisted in working in a field where my disability would not matter. I made modest money but saved. Bought a small condo. Got healthier. In 12 years I PAID OFF the condo. I excercized so much I got over my disability. And all meds. Now I have no mortgage and no illness. I work my regular job and freelance and am on the road to major wealth.

I beat all the odds and naysayers (and my parents were the biggest naysayers). I have done far better than my high school classmates who had all the advantages. Success CAN be had, but you have to have a strong will, perseverance and other old fashioned values they don't teach anymore.

anne writes:

I think we're all forgetting that Ted became an alcoholic at age 13 and spent his entire 20's in/out of jail. Plus he spent the last 20 years living on the streets and clearly is NOT in touch with what's going on in the world.
I think Ted didn't even have a clue as to how little $100k really is. Nor did he have a clue on how to make his finances last. Afterall, he said over and over and over again how he lives day to day and never thinks about 6 months from now. He's just not capable of it. Plus, the guy constantly blames everyone but himself for any and all problems he comes accross, the sign of a true alcoholic. There was no way he could have come out on top. No way.InsertTextHere

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