Summary:
Drake Bennett on Charle Karelis' take on poverty. Traditional economics doesn't apply to the poor. Seeing world not in terms of goods to be consumed but problems to be alleviated. Bee sting metaphor. Need to reduce number of economic hardships the poor have to deal with. No strings attached. (30/03/2008)
Notes:
- Economists: poor people have strongest incentive to subscribe to a Puritan work ethic: each dollar earned worth more than to someone with higher income
- Opposite seems to the case: poor are disproportionately likely to drop out of school, have children in their teens, abuse drugs, commit crimes, not to save money, not to work
- Different interpretations
- Social conservatives: poor people lack smarts/willpower to make right choices
- Social liberals: racial prejudice and crippling conditions of ghetto to blame; denying poor any choice in their fate
- Neoconservatives: antipoverty programs to blame, bribing people to stay poor
- Charles Karelis (George Washing University): traditional economics doesn't apply to poor:
- when poor, economic worldview shaped by deprivation, seeing world not in terms of goods to be consumed by as problems to be alleviated
- Bee sting metaphor: person with one sting highly motivated to get it treated; person with multiple stings does not have much incentive to get one sting treated, other will still throb; the more of a painful or undesirable thing one has (ie the poorer one is) the less likely one is to do anything about any one problem
- Poverty less a matter of having few goods than having lots of problems
- Poverty and wealth not two ends of spectrum, but fundamentally different experiences, each working on 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; enormous consequences
- economists by and large well-of, failed to see this shift
- antipoverty initiatives all along ideological spectrum unlikely to work; economists and poverty experts need to reconsider "scarcity," one of most basic ideas in economics
- Econ 101 created tired, phony debate about cause of poverty
- Karelis taking issue with law of diminishing marginal utility (the more we have of something, the less any additional unit of that thing means to us)
- applies in many cases but logic flips when dealing with privation rather than plenty
- dents in car, dishes in sink
- Karelis: being poor = having to deal with a multitude of problems; even if one works hard enough to pay off half of costs, some fairly imposing ones still remain, creating large disincentive to bestir oneself to work at all
- Karelis: core of proble not self-discipline or lack of opportunity; cause of poverty is poverty
- policy makers worried that the more aid government gives the poor, the less likely they are to work to provide for themselves (the "helping conundrum")
- Karelis disagrees: reducing number of economic hardships that poor have to deal with makes them more, not less, likely to work
- simply giving the poor money with no strings attached rather than using it to try to encourage specific behaviors would be just as effective, with less bureaucracy
- early 1970s study: aid tends to discourage work
- Karelis: data from that experiment ambiguous
