All Annotations of The sting of poverty, by Drake Bennett - The Boston Globe[Preview]

saved by4 people, first byjagannath rao adukuri on 2008-04-02, last byDaniel Andrlik on 2008-06-18

• In the community of people dedicated to analyzing poverty, one of the sharpest debates is over why some poor people act in ways that ensure their continued indigence. Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work.
• In the community of people dedicated to analyzing poverty, one of the sharpest debates is over why some poor people act in ways that ensure their continued indigence. Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work

• In the community of people dedicated to analyzing poverty, one of the sharpest debates is over why some poor people act in ways that ensure their continued indigence. Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work.

  To an economist, this is irrational behavior.

• To an economist, this is irrational behavior. It might make sense for a wealthy person to quit his job, or to eschew education or develop a costly drug habit. But a poor person, having little money, would seem to have the strongest incentive to subscribe to the Puritan work ethic, since each dollar earned would be worth more to him than to someone higher on the income scale. Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices. Social liberals have countered by blaming racial prejudice and the crippling conditions of the ghetto for denying the poor any choice in their fate. Neoconservatives have argued that antipoverty programs themselves are to blame for essentially bribing people to stay poor.

• Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices. Social liberals have countered by blaming racial prejudice and the crippling conditions of the ghetto for denying the poor any choice in their fate. Neoconservatives have argued that antipoverty programs themselves are to blame for essentially bribing people to stay poor.

  Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn't apply to the poor. When we're poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.

• Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn't apply to the poor. When we're poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.
• When we're poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.
• Poverty and wealth, by this logic, don't just fall along a continuum the way hot and cold or short and tall do. They are instead fundamentally different experiences, each working on the human psyche in its own way. At some point between the two, people stop thinking in terms of goods and start thinking in terms of problems, and that shift has enormous consequences. Perhaps because economists, by and large, are well-off, he suggests, they've failed to see the shift at all.
• If Karelis is right, antipoverty initiatives championed all along the ideological spectrum are unlikely to work - from work requirements, time-limited benefits, and marriage and drug counseling to overhauling inner-city education and replacing ghettos with commercially vibrant mixed-income neighborhoods. It also means, Karelis argues, that at one level economists and poverty experts will have to reconsider scarcity, one of the most basic ideas in economics.
• "It's Econ 101 that's to blame," Karelis says. "It's created this tired, phony debate about what causes poverty."
• "The Persistence of Poverty: Why the Economics of the Well-Off Can't Help the Poor,"
• The book in which he laid out his argument, "The Persistence of Poverty: Why the Economics of the Well-Off Can't Help the Poor," wasn't widely read when it was published last year.

• The economist's term for the idea Karelis takes issue with is the law of diminishing marginal utility. In brief, it means the more we have of something, the less any additional unit of that thing means to us. It undergirds, among other things, how the US government taxes people. We assume that taking $40,000 in taxes from Warren Buffett will be a lot less onerous to him than to an elementary school teacher, because he has so much more to begin with.

  In many cases, Karelis says, diminishing marginal utility certainly does apply: Our seventh ice cream cone will no doubt be less pleasurable than our first. But the logic flips when we are dealing with privation rather than plenty. To understand why, he argues, we need only think about how we all deal with certain familiar situations.

• Karelis argues that being poor is defined by having to deal with a multitude of problems: One doesn't have enough money to pay rent or car insurance or credit card bills or day care or sometimes even food. Even if one works hard enough to pay off half of those costs, some fairly imposing ones still remain, which creates a large disincentive to bestir oneself to work at all.

• Karelis argues that being poor is defined by having to deal with a multitude of problems: One doesn't have enough money to pay rent or car insurance or credit card bills or day care or sometimes even food. Even if one works hard enough to pay off half of those costs, some fairly imposing ones still remain, which creates a large disincentive to bestir oneself to work at all.

  
  
  

  
  

  "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."

• "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."
• Reducing the number of economic hardships that the poor have to deal with actually make them more, not less, likely to work, just as repairing most of the dents on a car makes the owner more likely to fix the last couple on his own. Simply giving the poor money with no strings attached, rather than using it, as federal and state governments do now, to try to encourage specific behaviors - food stamps to make sure money doesn't get spent on drugs or non-necessities, education grants to encourage schooling, time limits on benefits to encourage recipients to look for work - would be just as effective, and with far less bureaucracy. (One federal measure Karelis particularly likes is the Earned Income Tax Credit, which, by subsidizing work, helps strengthen the "reliever" effect he identifies.)
• Reducing the number of economic hardships that the poor have to deal with actually make them more, not less, likely to work, just as repairing most of the dents on a car makes the owner more likely to fix the last couple on his own. Simply giving the poor money with no strings attached, rather than using it, as federal and state governments do now, to try to encourage specific behaviors - food stamps to make sure money doesn't get spent on drugs or non-necessities, education grants to encourage schooling, time limits on benefits to encourage recipients to look for work - would be just as effective, and with far less bureaucracy. (One federal measure Karelis particularly likes is the Earned Income Tax Credit, which, by subsidizing work, helps strengthen the "reliever" effect he identifies.)
• "The bee sting argument, or the car dent one," he says, "I've never had anybody say that that isn't true."