Princeton’s Matthew Desmond Gets Everything Wrong About Poverty’s Root Causes
Aaron Brown, Reason, January 23, 2024
Excerpt:
Desmond gets more specific about what doesn’t cause poverty. He dismisses cultural explanations, such as single-parent households and declining marriage rates. He quickly dismisses the idea that the welfare state traps people in cycles of dependency, claiming that these arguments rely on anecdotal evidence, even though there’s a vast systematic literature on the subject. Desmond doesn’t take up political scientist Charles Murray’s basic challenge to explain why it is that between 1949 and 1964 the American poverty rate dropped by 22 percentage points before the government did practically anything to help. After President Lyndon Johnson launched his war on poverty, the decline leveled considerably.
Desmond approaches his firsthand investigations with the preconception that poverty is a byproduct of capitalist exploitation. Prices aren’t set in a competitive marketplace, in his view; they’re just a projection of greed. It’s “tempting,” he writes, “to blame rising housing costs on anything other than the fact that more than a few of us have a god-awful amount of money and are driving prices higher and higher through bidding wars.”
A chapter on the real estate market titled “How We Force the Poor to Pay More” argues that it’s twice as profitable to be a landlord in the inner city. Desmond doesn’t bother explaining why even more unscrupulous people don’t tap into this lucrative business opportunity.
The Truth About Tariffs
by Phillip W. Magness, Law & Liberty, January 24, 2024
In his rendering, Marshall comes across as something of a skeptic of comparative advantage who allegedly “chastised the Ricardians” for their theories about trade. To argue his point he excerpts a passage wherein Marshall allegedly condemned comparative advantage for having “laid down laws with regard to profits and wages that did not really hold even for England in their own time.” Turning to Marshall’s original text, we quickly discover that Cass has either misread or misrepresented the economist’s words. The passage in full reads:
And though this did little harm so long as they were treating of money and foreign trade, it led them astray as to the relations between the different industrial classes. It caused them to speak of labour as a commodity without staying to throw themselves into the point of view of the workman; and without dwelling upon the allowances to be made for his human passions, his instincts and habits, his sympathies and antipathies, his class jealousies and class adhesiveness, his want of knowledge and of the opportunities for free and vigorous action. They therefore attributed to the forces of supply and demand a much more mechanical and regular action than is to be found in real life: and they laid down laws with regard to profits and wages that did not really hold even for England in their own time.(emphasis added)
We accordingly find that Marshall’s grievance is not with Ricardian comparative advantage, but rather Ricardo’s other writings on the economics of labor and the conditions of the working classes in early nineteenth century England. Indeed, when Marshall penned a more detailed work on trade economics in 1919, it offered a conventional Ricardian account of comparative advantage.
Thomas Piketty’s Motte and Bailey
by Vincent Geloso, City Journal, January 18, 2024
Excerpt:
Whenever Piketty and his collaborators are confronted with these criticisms, they retreat to a motte position, arguing that there is such a thing as too much inequality and that inequality is higher now than in the 1970s. Both statements are defensible; they are also uncontroversial.
Feds Will Try Backpage Co-Founder Michael Lacey for a Third Time
by Elizabeth Nolan Brown, January 24, 2024
Excerpt:
The first trial, back in 2021, was declared a mistrial after prosecutors and their witnesses couldn’t stop suggesting that Lacey and his co-defendants were charged with child sex trafficking. They were not, and efforts to suggest as much could have seriously prejudiced a jury.
Apportionment & Immigration: 95 Percent of Noncitizen Growth Went to GOP States Since 2019
by David J. Bier, Cato at Liberty, January 24, 2024
No, the data are equally clear: recent immigration trends are benefiting Republicans in states where they control the legislature and manage redistricting. About 62 percent of the three‐million increase in the total immigrant population from March 2019 to March 2023 has occurred in GOP states, according to the Current Population Survey Annual Social and Economic Supplement.
Unions: Facts and Fluff
by Timothy Taylor, Conversable Economist, January 25, 2024
Remember that during this “banner year for labor actions and unions,” the share of US workers who actually belong to a union was shrinking–and has been shrinking for decades, including last year and in fact during the entire presidency. It’s true that in general, public attitudes seem more supportive of unions. But some of the union successes in the last few years, like the first success in unionizing an Amazon warehouse (on Staten Island), have since become mired in controversy and seem in danger of failing.
But [Suresh] Naidu also points to an even more fundamental issue that US unions face: they need to organize one company at a time. In a dynamic US economy, where some companies are always shrinking or going out of business, this means that unions are running on a treadmill: they need to keep organizing new unionized companies just to offset the typical year-to-year loss of previously organized companies.
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READER COMMENTS
steve
Jan 28 2024 at 1:17pm
Poverty precedes the welfare state by many thousands of years. It’s even more prevalent in countries without a welfare state. Maybe at the margins it matters but it’s really hard to see a welfare state as the root cause of poverty.
Steve
Richard W Fulmer
Jan 28 2024 at 4:04pm
Poverty is humanity’s natural state. It’s root cause is low productivity, and that didn’t change significantly until the Industrial Revolution.
In the United States, thanks to (mostly) free markets, the poverty rate declined from about 80% in 1800 to about 15% in 1965. LBJ’s Great Society programs all but put an end to that progress. After over a half century and some $25 trillion, the poverty rate is about where it was when the programs began. The bottom quintile’s employment rate dropped from about two-thirds to one-third. Fatherlessness, along with its attendant ills (increased dropout rates, drug addiction, alcoholism, unemployment, crime, suicide), has exploded.
So, you’re right. The welfare state isn’t the root cause of poverty, but it has prevented the free enterprise system from enabling millions of Americans to pull themselves out of poverty.
john hare
Jan 28 2024 at 2:07pm
I would suggest welfare is the root cause of some perceived poverty. In the US, there are many people that are better sheltered, fed, entertained, and transported than the population anywhere up to a century ago. They are still considered to be in poverty. Having been hungry many decades ago, I can still appreciate the difference between hungry and not having access to the same as others. (Ramon noodles being delicious when really hungry)
Where we might disagree is in the cause of some staying in defined poverty. In defined poverty, some can get assistance on food, shelter, and other needs well in excess of serious poverty. In some cases, a better lifestyle than those working full time.
Richard W Fulmer
Jan 28 2024 at 4:44pm
I think that Geloso’s criticism of Piketty misses a key point. He argues, probably correctly, that the increase in inequality that Piketty’s detected largely (but not completely) disappears when wealth transfers are taken into account. However, wealth transfers have increased significantly since the 1960s and 1970s, implying that the underlying inequality has increased much more. By “underlying,” I mean inequality based on real, unsubsidized earnings, which is the inequality about which Piketty complains.
That further suggests that the wealth transfers haven’t eliminated underlying inequality and, if anything, have made it worse. Piketty’s solution is more wealth transfer – higher taxes and more handouts. But that will likely erode the poor’s ability and willingness to produce goods and services even more, making real, underlying inequality worse still.
To put it another way, the poverty rate hasn’t changed much since LBJ instituted his Great Society programs (as I noted in my response to steve, above). Imagine what would happen if we pulled the plug on the welfare state, restoring government transfers to their pre-Great Society levels. Wouldn’t the poverty rate would shoot up significantly? If so, that means (again) that welfare programs have increased underlying poverty, while masking the increase with transfers.
David Seltzer
Jan 29 2024 at 1:36pm
Richard wrote: “That further suggests that the wealth transfers haven’t eliminated underlying inequality and, if anything, have made it worse. Piketty’s solution is more wealth transfer – higher taxes and more handouts. But that will likely erode the poor’s ability and willingness to produce goods and services even more, making real, underlying inequality worse still.” Good point Richard! Phil Gramm, et al offer evidence supporting your point in The Myth of American Inequality. Pierre Lemieux has a nice review of it in Regulation (Winter 2023-2024),
Richard W Fulmer
Jan 29 2024 at 4:35am
Capitalism creates relative poverty; those who engage in the free enterprise system become far richer than those who don’t. Joblessness is the number one predictor of poverty in America.
Comments are closed.