Spot the Problem
By David Henderson
In a July post, Matt Bruenig estimates that in the absence of government programs to alleviate poverty, the percent of Americans who would be officially classified as poor would be a whopping 23.8% versus what it actually is: 15%.
Go to his article and figure out how he estimated this. It’s relatively straightforward–it’s straight arithmetic.
Now put on your economist’s hat and see if you can find anything wrong with his methodology. I don’t mean that you might find some government program he failed to take account of: he already admits that his measure isn’t perfect from that viewpoint.
Here’s a hint: what is he assuming about human behavior? Or, to hone the question further, what is he assuming about the effects of these programs on human behavior? Finally, is his assumption justified? Why or why not? (“Why or why not?” is my version, on problem sets and exams, of Bryan Caplan’s “Show your work.”)
HT to Stephen Roth.