Arnold Kling  

I Heart Kevin Lang

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With his new book, Poverty and Discrimination, Kevin Lang becomes my go-to guy on poverty. I disagree with him on some important and emotional points, and I'll have more to say about that at a later date. But I want to use this post to say why this is such a terrific book, even for non-economists or for economists whose interests lie elsewhere.

Some excerpts:

On p. 9


Inevitably, on occasion I am forced to say "most researchers believe that"...In general, however, I try to resist the temptation to be the ultimate judge of a body of literature rather than giving you the tools and information you need to evaluate it.

As you might guess from what I've been saying recently, I prefer to be able to evaluate the evidence myself, so I really appreciate this promise, which Lang keeps. What's more, the quality of the presentation of data is simply outstanding. He does not waste my time with tables of coefficients from multivariate regressions, which I would not believe. Instead, he plots data or puts it into tabular format in ways that display clear, reliable relationships.

On p. 35,


Thus we can say, "An individual is poor if he or she lacks sufficient financial resources to obtain adequate food, clothing, shelter, and medical care and to participate in society.

The problem of defining poverty is difficult. Lang uses the phrase "participate in society" because he thinks that better fits our intuition about poverty. A person could have adequate food, clothing, and shelter but still not feel accepted on economic terms in most American neighborhoods. Taking this elastic approach to defining poverty helps to rationalize the official poverty line, which is about $20,000 for a family of four, and perhaps justify a higher figure, even though $20,000 would be considered affluent in much of the world.

On p. 39-40,


Most food stamp recipients spend more on food than they receive in food stamps...Because most food stamp recipients want all their food stamps...food stamps are probably worth close to their nominal value...

At the other extreme, the evidence suggests that people would not purchase insurance with the value of their Medicaid health insurance if it were not provided in its in-kind form.


Lang is discussing the valuation of in-kind transfers in measures of poverty. But this is potentially a fairly damning quote with regard to health insurance mandates and universal coverage, if you think about it.

On p. 89,


If per capita GDP increased but the poverty rate did not fall [which the data for the 1975-2004 period show], there are only two mechanisms...The first is that households become smaller...the second explanation is that income inequality increased.

I think there is a third possible mechanism--immigration. Lang talks about immigration as if it changes the mix of workers, adding to the unskilled and lowering unskilled workers' wages. As he points out, this effect is unlikely to have a large impact on poverty rates. What he omits, as far as I can tell, is the arithmetic effect on the poverty rate of pouring poor immigrant families into the system. I'll have more to say on that some other time--I think it's worth an entire essay.

On p. 100,


a 1 percentage point increase in the poverty rate due to an increase in the number of female-headed families cannot explain why the relation between GDP per capita and poverty was not maintained after 1973. Indeed, the trend toward more female-headed households was present over the 1959-1973 period but did not obscure the decline in poverty associated with economic growth.

On p. 382,


We have seen that the minimum wage is a blunt tool for addressing poverty. Nevertheless, the minimum wage is very low by historical standards...A reasonable goal is to raise the minimum wage to a level comparable to that of the 1970s

It's only a slight exaggeration to accuse Lang of saying that raising the minimum wage won't really do anything to alleviate poverty, but we should do it to show that we care. (Sort of like Robin Hanson's theory of wasteful health care spending.)

In fact, I think that one could fairly conclude from Lang's work that many anti-poverty policies are "blunt tools," with relatively weak or even uncertain impacts on poverty. Personally, I would be comfortable with that conclusion.

Notwithstanding my quarrels with Lang on some key issues, Poverty and Discrimination is social science at its best. The issues are interesting, the analysis is first-rate, the organization is excellent, and as I noted earlier the presentation of data is exemplary.

The book is intended to be used as a course textbook, and it would serve that purpose very well. But I think that many economists who do not teach courses on poverty would still value Poverty and Discrimination as a reference. And I think that non-economists who want to get introduced to some real economics (as opposed to Freakonomics) would find it rewarding.

Finally, I recall my oldest daughter's comment that in sociology courses you only learn that "There's poverty and America sucks." If American poverty is indeed the obsession of sociologists, then Poverty and Discrimination ought to be read by every member of that profession.


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COMMENTS (10 to date)
Floccina writes:

The Florida state lottery commition's actions show that it strongly disagrees with this statement:

'Most food stamp recipients spend more on food than they receive in food stamps...Because most food stamp recipients want all their food stamps...food stamps are probably worth close to their nominal value...'

Further even if true substitutiuon could could push food spending lower even if recipients spend more on food than they receive in food stamps.

Floccina writes:

IMO It seems that most people identify poverty like pornography they cannot define it but they think that they know it when they see it. In this regard having lived in a 3rd world country where the middle class have less than the poor here, I equate American poverty with sloppiness and lack of organization rather than a true lack of things. Further I think that the biggest problem that most people have with poverty in America is that it is ugly but people are not even honest enough to admit that to themselves. BTW I was once told by someone that they see more poor people in the USA than in other countries to which I replied, “How did you know that the people that you saw where poor?

Further the problems that poor people in the USA have are often problems otherwise associated with having too much money (see Anna Nicole Smith). Drug and alcohol use, violent crime (see notes below) obesity, divorce, children out of wedlock, seeking tournament occupations too much positions making a mess, poor effort in school.

IMO some people cannot handle too much money we see this in some lottery winners and professional athletes who come from poor backgrounds.

NOTES:

1. According to a study in England violent crime rises when the economy is good due to increase drug and alcohol use, violent crime rose sharply in the USA around 1965, violent crime fell in the great depression although most of that decline was due to repeal of prohibition.
2. Tournament occupations include jobs that most people do not make money at but a few make big money. Tournament occupations include entertainment sports and evidently according to Levit et al. drug selling.
3. Divorce was once thought of as a rich person’s action. Also divorce rose as we got wealthier and could afford it.
4. If you are very worried about being able to feed your children you are careful to not get pregnant. Also out of wedlock births rose as we got wealthier and could afford it.
5. People in urban settings reduce the number of children that they have in response to poverty see the great depression.
6. Although we associate poor effort in school with poverty people in colleges will often talk about the effort that people from poorer countries make in school to avoid the poverty of their homelands.

Floccina writes:

BTW I have thought about this a lot. I, as an adult, for quite a time made little more than minium wage but, I was never poor. I also have helped some poor individuals. They always think that the problem is that they do not have opportunity to make enough money, I never see it that way having had made less.

dearieme writes:

"financial resources": is that money?

matt writes:

"Because most food stamp recipients want all their food stamps...food stamps are probably worth close to their nominal value..."

- Apparently this Lang guy has not done any field research on this topic. At the local Harris Teeter (a supermarket) in Chapel Hill, NC, on any given day you will see people standing out front selling their food stamps for 60 to 70 cents on the dollar (Presumably the government doesn't sanction the funding of nicorette patches and self-help books on alcoholism).

Maybe in an ideal world (in a rational world, if you will), food, clothing, and shelter are the three most prioritized goods in our utility functions. But it is not too much of a stretch to assume the inhabitants of the poverty world to be irrational, and thus we must exercise the utmost level of meticulousness when applying standard assumptions to the behavior of the poverty-stricken. While I usually like to shy away from making normative claims, we should not discard the possibility that poverty is an extremely self-perpetuating phenomena. I firmly believe that there exist fixed unobservables (propensity toward poor life decisions) amongst a sizeable portion of the poor population that prohibit them from ever having a chance to become self-sufficient. The folks outside of the Harris Teeter here are a case in point (Please don't assume that I am one who believes that all of those who are poor are poor because they choose to be that way. All I am saying is that we should not assume rationality amongst the entire poor population (disproportionate lottery ticket sales amongst the lowest quintile of wage earners provides some evidence here) much in the same way that we can not assume rationality (or economic rationality at least) on the part of workers competing for a promotion.

While I have not yet read this book, I tend to exercise caution whenever I hear citations of correlations between macro-oriented variables...

Matt writes:

"..the minimum wage won't really do anything to alleviate poverty.."

The minimum wage is a signal to the fed that our "inflation expectations" have arrived and stop inflating the economy.

Without the minimum wage, the fed, as stupid as it is, would continue to pump inflationary dollars.

Michael Sullivan writes:

- Apparently this Lang guy has not done any field research on this topic. At the local Harris Teeter (a supermarket) in Chapel Hill, NC, on any given day you will see people standing out front selling their food stamps for 60 to 70 cents on the dollar (Presumably the government doesn't sanction the funding of nicorette patches and self-help books on alcoholism).

I don't think this is a legitimate criticism unless you only count "tradeable value" as value.

If 90% of food stamp recipients use all of them, then the average value will be at least 90% even if the other 10% destroy them.

The fact that they go for 60-70% outside the local Harris Teeter is probably a function of illiquidity and lack of trust.

matt writes:

"The fact that they go for 60-70% outside the local Harris Teeter is probably a function of illiquidity and lack of trust."

A lack of trust in what? in their ability to survive without nicotine and alcohol? You can not neglect the potential size of the market for tradeable foot stamps.

The fact of the matter is that giving people straight cash is the best way to maximize their utility and by having the government decide the portions of appropriations, welfare taxes that convert to food stamps only serve their purpose to the extent that recipients actually use their food stamps as they were intended.

Moreover, I used to work at a supermarket and way too many times had I rung up both food purchased on foodstamps and $50 worth of lottery tickets in the same order. So please do not try to tell me that bartering for cash is an isolated occurence..

Jim writes:

"I recall my oldest daughter's comment that in sociology courses you only learn that "There's poverty and America sucks.""

Well then, either you foolishly sent your daughter to a bad school or your daughter foolishly failed to learn what a good school had to teach her. I suggest an elite group of sociologists be appointed to determine in detail the education of each American student, since the citizenry are clearly too irrational to be entrusted with the responsibility.

Steve Sailer writes:

The best working definition of poverty is that it's when you can't afford to insulate yourself (and your children) from poor people.

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