Poverty: Is it Circumstances or Decision-Making?

Oh, yes, you’re right. Your postscript gives an example of how external conditions affect decision-making abilities. And I agree with that point of view.

But I get the sense that many people fall into thinking about poverty or life misfortune in a this-or-that kind of way. The culprit of poverty is either the outside world or the person; either small farms in Africa or a person’s own poor financial management. Rarely, in general, do I see people putting the person making the decisions back into the context of the world.

That is, I guess I would disagree, at least somewhat, with the assertion: “But I also suspect that as countries become richer, [1] a greater share of poverty is due to poor decision-making and [2] a smaller share is due to circumstances.” I’m a little uncomfortable with this thesis because, to my mind, at some level or other, decision-making can’t be separated from circumstances. If, however, the sentence had been tweaked to say “institutional/sociological circumstances” or “geographic circumstances” or “broader, coarser-grained circumstances that no individual could likely influence or alter in any way” or something like that instead, I probably would agree just about entirely.

But again, mainly I meant, by comment above, that “I’m a little less comfortable than _others_” as in others generically, like the shadowy “they” or “the man” that people like to bat about in conversation.

This is a topic in ethics, sure. But it’s also a topic involving utility maximization.

“If the individual can take reasonable steps to avoid poverty, then the individual (and not the circumstances) is to blame.”

Even if a person fails to take reasonable steps to avoid poverty and is therefore to blame and has satisfied some sensible-enough definition of moral failure, by this person’s failing to avoid poverty, the world’s level of utility and well-being has now declined. So it’s in everybody’s interest (of course to varying degrees) to have prevented this. (Or, at least, if by some handwavy calculations, humanity or society or whatever aggregate in aggregate can determine that its necessary extent of effort is less impactful than one additional bankruptcy.) Nobody wants the Pareto frontier to collapse at even a single point. People would prefer, if at all possible and practical, to prevent the kinds of outcomes described by the NBER study above.

Now, is it possible to prevent any random somebody’s financial collapse? No, not generally. But I suspect that the “cost” of society’s trying to understand why any particular person is reckless with money or has a propensity to make bad decisions is just about negligible. Not nothing, but more-or-less negligible if the responsibility for understanding and modeling human behavior is spread out across multitudes. Actual preventative actions, in accordance with the information gathered, would obviously be more costly; how much more so, I don’t know; mitigation costs might be less than the costs of specified kinds of misjudgment or they might not be. However, the kind of ethico-epistemo-crowd-watching we’re doing here under Sumner’s post — a lot of people are inclined to do something like that naturally anyway, so I don’t think the (opportunity) costs are all that considerable.

Is there even any point to hazarding the rabbit hole of a higher-order blame game? Looking for reasons for reasons for reasons …? Blaming A for B, which had been blamed for C, which had been, in turn, blamed for …? Eventually, since human beings are finite beings, of course not. Eventually, asking ‘why?’ has to become “a pointless conversation about free will”. But it’s my opinion that, generally, we (Perhaps we can exclude economists and statisticians like those of the NBER as well as philosophers. Can we exclude most policy makers too?), the average ‘we’, the “rubber meets the road” ‘we’, stop short of where we should. We go right to the threshold of “individual” and anything beyond that line collapses into, for some, apathy, into, for others, moral desert, and, into, for yet others, impracticality. All three of these collapsed states are right to some degree, but my own sensibilities suggest they’re usually inadequately descriptive if our goal is to understand the world as well as we can, to promote cohesive relationships in society as well as we can, and to improve our economic situation to the utmost practical extent.

And I think that — I think our culture, and all of us comprising it, should hone the habit of scrutinizing the complexities and deceptive obviousness of human behavior — because your point “under the same circumstances some decision makers are wildly better than others” is too important and too puzzling not to. Why exactly are some decision makers better than others? Why, under seemingly identical circumstances, do people make different decisions? Of course, the simple answer is that situations aren’t actually identical. But, to some extent, that’s beside the point. The point is that this question is a utility-maximization question. It’s an economics question. It’s asking the people affected by a situation (which are all of us to one degree or another, not just economists): What exactly can be done to improve the outcome, in net, of any particular situation associated with bad decision making? There’s no way of putting a plan to do this into place without answering that question. And there’s no way of answering that question without identifying (or trying, anyway, as systematically as possible, to identify) the reasons underneath what we generally consider a species of moral failure — that is, a propensity to make bad decisions. Of course, we may learn, after we discover the likely causes of a person’s behavior, that no practical action is possible. But we can’t know that without understanding the person first and developing some kind of intellectual sympathy for the person first. We can’t, for example, reduce the current number of bankruptcy filings by former NFL players by ascribing to them poor judgment and stopping there with that pronouncement. We have to step past the blame boundary and treat their situation more like an MBA exercise.