Poverty and Behavior: Generalizing Yglesias

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.

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.”

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.

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.

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.

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.’

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.

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.

“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.”

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.

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

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.”

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.

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?

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.