Bryan Caplan  

Poverty and Behavior: Generalizing Yglesias

Capital One's Actuals... The Magic Solution of Devaluat...

Last week, Matt Yglesias had an extremely insightful critique of the view that unemployment remains high because "we are not as wealthy as we thought we were":

It is both true that we are not as wealthy as we thought we were and that there's a lot of joblessness in the United States, but I struggle to grasp a model in which the former causes the latter. Imagine a reverse situation. A town full of working-class people sees its unemployment rate suddenly shoot up from 11 percent to 27 percent. Concurrently, it turns out that the town's residents were much wealthier than they thought they were--each one of them actually had a check for $1 million sitting in their pockets. We might say it's pretty clear what's happened here. These folks are wealthier than they thought they were so they raised their reserve wage. But then suppose it turns out the checks were fraudulent and they all bounce. The reserve wage should fall and joblessness should decline. That it seems to me is the supply-side story about the relationship between wealth and employment.

Only this morning, though, did I realize that Matt's point is far more general.  Consider the following claim:

We can't blame X on poverty because poverty is a reason to avoid X.  

This claim makes perfect sense if X=unemployment.  If you're poor you need money, and working is a good way to get money.  But the claim is equally sensible if X= any of the following:

  • alcoholism: Alcohol costs money, interferes with your ability to work, and leads to expensive reckless behavior.
  • drug addiction: Like alcohol, but more expensive, and likely to eventually lead to legal troubles you're too poor to buy your way out of.
  • single parenthood: Raising a child takes a lot of effort and a lot of money.  One poor person rarely has enough resources to comfortably provide this combination of effort and money. 
  • unprotected sex: Unprotected sex quickly leads to single parenthood.  See above.
  • dropping out of high school: High school drop-outs earn much lower wages than graduates.  Kids from rich families may be able to afford this sacrifice, but kids from poor families can't.
  • being single: Getting married lets couples avoid a lot of wasteful duplication of household expenses.  These savings may not mean much to the rich, but they make a huge difference for the poor.
  • non-remunerative crime: Drunk driving and bar fights don't pay.  In fact, they have high expected medical and legal expenses.  The rich might be able to afford these costs.  The poor can't.

Yet as Charles Murray keeps reminding us, all of the pathologies on my list are especially prevalent among the poor.  Does this show that Yglesias is wrong?

Hardly.  Few claims are more obvious than "Being poor is a reason to save money, work hard, and control your impulses."  The right lesson to draw, rather, is that social scientists need to search for factors that cause both poverty and irresponsible behavior.  Such as?  Low IQ, low conscientiousness, low patience, and plain irrationality.

Isn't this just "blaming the victim"?  No, it's something more radical: disputing the poor's presumptive status as "victims." 

Trailer: This is just one of the many topics I'll be exploring in the book I plan to write after I finish The Case Against Education.  Working title: Poverty: Who To Blame.

COMMENTS (27 to date)
Noah Yetter writes:

Unfortunately for the both of you, Yggy has completely misunderstood the idea behind "we are not as wealthy as we thought". Think wealth effects on spending, not wealth effects on reserve wages. Just walk over and have Tyler explain it.

Steve Sailer writes:

Thank God we let in all those low IQ, high fertility illegal aliens to drive down Americans' wages.

Nicholas Weininger writes:

One counterargument to this I find persuasive is that impulse control is harder for poor people, especially those raised poor, because the expected return to impulse control is smaller and the short-term marginal utility of giving into your impulses is higher. As Orwell put it:

"The basis of the unemployed miners' diet, therefore, is white bread and margarine, corned beef, sugared tea, and potatoes – an appalling diet. Would it not be better if they spent more money on wholesome things like oranges and wholemeal bread or if they even, like the writer of the letter to the New Statesman, saved on fuel and ate their carrots raw? Yes, it would, but the point is that no ordinary human being is ever going to do such a thing. The ordinary human being would sooner starve than live on brown bread and raw carrots. And the peculiar evil is this, that the less money you have, the less inclined you feel to spend it on wholesome food. A millionaire may enjoy breakfasting off orange juice and Ryvita biscuits; an unemployed man doesn't. Here the tendency of which I spoke at the end of the last chapter comes into play. When you are unemployed, which is to say when you are underfed, harassed, bored, and miserable, you don't want to eat dull wholesome food. You want something a little bit 'tasty'. There is always some cheaply pleasant thing to tempt you. Let's have three pennorth of chips! Run out and buy us a twopenny ice-cream! Put the kettle on and we'll all have a nice cup of tea! That is how your mind works when you are at the Public Assistance Committee level. White bread-and-marg and sugared tea don't nourish you to any extent, but they are nicer (at least most people think so) than brown bread-and-dripping and cold water. Unemployment is an endless misery that has got to be constantly palliated, and especially with tea, the English-man's opium. A cup of tea or even an aspirin is much better as a temporary stimulant than a crust of brown bread."

Eric Evans writes: scientists need to search for factors that cause both poverty and irresponsible behavior. Such as? Low IQ, low conscientiousness, low patience, and plain irrationality.

I don't think the two are necessarily related. All the things you've described are prevalent in or at least on the rise up through the middle classes. And if they're not related, you can count on the education system being the major factor behind these trends.

Lord writes:

I can imagine such a model, not just that we are not as wealthy as we once were, but that we no longer have the means or a way to become as wealthy as we once were or at least thought we were. Bad lending standards could give us the illusion of wealth, but worse ones couldn't fool us forever, and when our wealth came from gains and speculation, it is difficult to now obtain it from work when it never was obtained from work before, and in fact the Fed insists on making it impossible to obtain it from work.

Kenneth A. Regas writes:

It is sad that a book needs be written to dispute the poor's "presumptive status as victims." Aver that presumption in a blue-collar context, among people who do physically demanding work that isn't fun, and you'll get snorts of derision. I'm with them.

Among able-bodied American adults with at least a modicum of smarts, involuntary poverty is almost exclusively the result of foolish behaviors like those described in the post. Any poor person who eschews such behavior is only temporarily poor.

We have ethnic minorities who arrived in this country as poor as church mice, eschewed foolishness, and now thrive. Central European Jews come to mind. And then we have other groups - think the Scots-Irish - who seem to have foolishness embedded in their subcultures, thereby ensuring the "cycle of poverty." So if there are victims, then the victimizers are the families that pass down foolishness as a cultural legacy.

Is any of this even the least bit controversial? If so, why?

Paul Gowder writes:

Bryan, have you considered at all the fact that the poor are under a constrained choice set? Maybe, e.g., more "responsible" pleasures than drinking or sex are priced out of the range of the poor? Or the life of a poor person is so miserable that drinking is the only way to escape?

Or my very favorite example, being single. Gee, good thing the poor are just as desirable marriage partners as are the rich. And good thing the poor have the same kind of social opportunities to meet desirable marriage partners as do the rich. If both of those things weren't true, well, then lower-income people might have less opportunity to marry, and those whom they marry might be less desirable. Lower-income women might, for example, find themselves in abusive relationships because they can't find better partners. Good thing that doesn't happen, eh? For a moment, I'd almost thought poverty was some kind of misfortune that might have collateral consequences.

Poverty can still cause X, even if poverty is a reason to avoid X, if poverty also eliminates the better-than-X options. Fundamental attribution error.

Tyler Cowen writes:

Noah Yetter, the first comment listed above, is completely correct...

Bill Woolsey writes:

And Yetter and Cowen:

We call that the paradox of thrift.

People people are poorer and save more, then the interest rate falls. This results in a decrease in the quantity of saving supplied and an increase in the quantity of investment demanded. The composition of spending changes, but total spending doesn't change.

Chris Stucchio writes:
One counterargument to this I find persuasive is that impulse control is harder for poor people, especially those raised poor, because the expected return to impulse control is smaller and the short-term marginal utility of giving into your impulses is higher.

This is an odd claim to make. Consider a middle class adult, chugging his way through 4 years college + 2 years grad school. What's his reward, a moving from middle class to upper middle class in 6-10 years time while enduring poverty in the present?

In contrast, a poor person can move from poor to middle class in a similar amount of time.

If we believe in diminishing marginal utility, the poor person is getting a much bigger reward.

The short term marginal utility hit is probably similar - the middle class person is studying and enduring poverty (at least for 4-6 years). Quite possibly the person enduring college is suffering more material deprivation than the person enduring poverty. This essay seems relevant.

Seth writes:

Thomas Sowell has written on this topic a fair amount.

What allows folks to get by with, "Low IQ, low conscientiousness, low patience, and plain irrationality"?

We've removed the negative feedbacks (e.g. earn a high school diploma w/o being able to read) to those behaviors and provided some positive feedbacks (e.g. EBT)to it. When you couldn't get by having low conscientiousness, you modified your behavior. Incentives matter. Folks respond to incentives. Ever watch Supernanny?

Folks who have made the personal choices to avoid such behavior have a tough time seeing it. They suffer from personal preference bias. "I wouldn't behave in such a way, so they wouldn't either, so there must be some other factors."

Sowell claims that normal societal feedbacks were reducing these behaviors through the middle part of the last century, until the government got into large scale social experimentation, I think. Until liberals, by and large, said 'you have a right to act like a jackass, society will help you get by.'

Joe Cushing writes:

We didn't loose as much wealth as people think. while a very common asset, homes, has been determined to be worth fewer dollars, so that people who own homes total assets are worth fewer dollars, it also takes fewer dollars to buy the same asset that has been devalued. In other words, people have less money when they sell a house but it takes less money to achieve the same standard of housing when they buy another house.

RPLong writes:

The simpler response to Yglesias is:

A) If you go for that Austrian school stuff, we consumed our capital rather than saving it.

B) If you think the Austrian school is nuts, we engaged in inter-temporal substitution favoring present consumption over future consumption, and we are now in period t+1.

Arthur writes:

Know what can cause poverty and irresponsible behavior? Poor parents.

Mike W writes:

If "[b]eing poor is a reason to save money, work hard, and control your impulses", what chance do the poor have when government policies are directed at the opposite.

From today's WSJ:

During a pen and pad briefing with reporters on Capitol Hill, [House Democratic whip Steny] Hoyer was asked if any Democrats are "reconsidering the wisdom" of letting the Bush tax cuts expire at year's end for the top income earners given the still struggling U.S. economy.

"I haven't talked to any who are of that mind," said Hoyer. "If you talk to economists, they will tell you there are two things that are the most stimulative that you can do—one's unemployment insurance, the other's food stamps, okay?"

"Why is that?" he said. "Because those folks who receive those resources must spend them. And they'll spend them almost upon receipt. Most economists with whom I talk believe that those with significant discretionary income, that that's not the case."

Floccina writes:

Yes I find Democrats somewhat self-contradictory when the hold:

1. The value of a marginal dollar is higher to the poor.

2. Poverty causes people to put less effort into school and earning money etc.

It seems to me that it is the rich should be less motivated to push their children to work hard at school.

jb writes:

It takes a huge amount of willpower to go from poor to not-poor. You have to resist your peers disdain, TV's shrieking demands to consume, your worn-out body, the boringness and privation of not spending your money on things you enjoy.

And culture does not help - fashionable toys and clothing are expected. 'Seize the day' and 'You can't take it with you' are the incessant reminders of our media. You are going to die, so why not buy that cool new phone, or those shoes, or that new energy drink, or that new beer?

Sometimes, it's a wonder that anyone ever escapes from poverty.

But some people do. They endure, and they rise above the noise of consumption. They put the extra time in, avoid bad influences, limit expenses, endure the disdain of their more free-wheeling friends. Why? Because they have more willpower.

No one escapes poverty without willpower. Lots, and lots, and los of willpower. And as Arnold Kling has said, willpower is both a muscle and a bank.

To me, if I could do anything for the poor, it would be to design programs that incent them to improve their willpower.

Because, IMO, the root cause for all the ills that Bryan describes is a lack of willpower.

Thomas DeMeo writes:

If anything, we are far wealthier than we think we are. As an aggregate society, our wealth is quite clear. We have what we have. As individuals, we feel far less wealthy because our systems for associating who has a right to what are somewhat less than perfectly efficient, and create entanglements. This is particularly true during economic slowdowns. The wealth hasn't gone anywhere. We just reach a point of entanglement where we can't agree to how use some of it anymore.

Philo writes:

*Whom* to blame? Who *is* to blame?

Nathan Smith writes:

re: Steve Sailer, "Thank God we let in all those low IQ, high fertility illegal aliens to drive down Americans' wages."

If you mean that undocumented immigrants reduce the average wage in the United States, why is that a variable of interest? Immigration might lower the average wage of US residents while benefiting every single individual resident. If you mean that undocumented immigrants reduce native-born Americans' wages, no, they don't-- in general, they raise them. Learn the principle of comparative advantage.

By the way, I trust Bryan's book will shame the #1 culprit in world poverty: MIGRATION RESTRICTIONS. That's the main answer to "Poverty, who to blame."

John Fast writes:

Nathan Smith wrote:

By the way, I trust Bryan's book will shame the #1 culprit in world poverty: MIGRATION RESTRICTIONS. That's the main answer to "Poverty, who to blame."
I would wager that Bryan's book will have sections dealing with global poverty as well as poverty within individual nations (and possibly the latter will have separate discussions of poverty in developed welfare states versus poverty in third-world kleptocracies).

Bryan: Thanx for writing these books so that I don't feel bad about not writing them. "The universe doesn't care who does something, only that it gets done."

R. Jones writes:

Re Floccina:

Is it possible that the marginal value of spending a dollar is different from the marginal value of earning a dollar? Or simply having a dollar?

Paul writes:

There is some evidence that poverty during childhood, poor parenting, and dangerous neighborhoods are all factors that very negatively impact the cognitive-emotional development of children, and perhaps even do permanent damage. I believe that this fact is often the basis of liberal arguments in favor of strong government funded safety nets. Just a thought to throw into the mixer for debate.

Gary Rogers writes:

[If you're poor you need money, and working is a good way to get money.]

But, with a good safety net to alleviate the effects of poverty why live responsibly? Why not let the next generation pay the bill?

Ken writes:

There are actually a lot of high IQ people that are poor. Many of them get bored with school because it goes so slow.

One cause of unemployment that is rarely mentioned is having a record. I wonder what percentage of the poor can't find a job because they have to check the felony box? How many of those were victimless crimes?

Thomas van Dijck writes:

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Dent writes:

Paul is right. The strength of frontal cortical connections to the limbic system (impulse control) can be negatively influenced by childhood stress.

I personally think poor people, alcoholics, people with history of violence or mental illness etc. should not be allowed to have children at all. Creating a child is a non-consensual victimization process, and the worse the circumstances, the more harm it causes.

It's not even clear working oneself out of poverty leads to a life worth living. One will still endure the unpleasantness of work for decades, suffer and then die. It's not like the poor can work themselves to such riches that they can one day expect to be free from the treadmill.

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