Karelis says that persistent poverty-including behavior is the main cause of persistent poverty, that none of the other major theories can explain what’s going on, and that he can. How?
He starts by attacking what initially seems like one of the most banal assumptions in all of economics: diminishing marginal utility. If you could either have $500 for sure, or $1000 with 50% probability, you’d want the sure thing, right? Economics aside, isn’t this just common sense? Not according to Karelis. The real story, he says, is that some goods (“pleasers”) have diminishing marginal utility, but other goods “(relievers”) have increasing marginal utility. For pleasers, you prefer a sure thing over a gamble with the same expected value; for relievers, however, you prefer a gamble to a sure thing with the same expected value.
Relievers, such as salves, are goods that reduce pain, unhappiness, or misery. Contrary to the law of diminishing marginal utility, which purports to hold for goods generally, relievers are a major type of good that exhibit increasing (not diminishing) marginal benefit. The benefit of relievers—namely, relief—grows as consumption grows, but the benefit grows faster than the consumption. Equal increases in the consumption of relievers produce ever-bigger increases in the relief that is felt by the consumer.
The best evidence of this is common experience. Consider the following scenarios. In Scenario One, you are sitting quietly in a field, and suddenly you are stung by a bee on your hand. The spot that was stung hurts terribly, and it is virtually impossible not to pay close attention. In Scenario Two, likewise, you are stung on the hand, but at the same moment you also are stung six times elsewhere on your body. Surely the sting on the hand would be much more noticed in the first case, where it was the only sting, than in the second, where it was one of seven. The sting on the hand would be like a shout that is striking in a quiet street but hardly noticed in a riot.
Given all this, consider the impact of dabs of salve, each of which we may imagine relieves just one sting. Go back to Scenario Two, the scenario where you suffer seven stings. Suppose that in this situation a single dab of salve is applied to the sting on your hand one second after it happens. Bearing in mind that you still have six uncured stings elsewhere on your body, you would not expect applying this one dab to make much difference. It would be like quieting one shout in a riot. Most people would pay little for a dab of salve for their hand in this situation. But now change the supposition a bit more. What if, just before the dab is applied to your hand, six dabs of salve are applied to the six stings on your body? This surely makes the impact of the dab of salve on the hand much greater…
[…]
Moving now from physical to mental relief, we see the same principle in operation. The first scratch sustained by a new car distresses its owner. It is hard to look at the scratch. Each subsequent scratch causes new displeasure, but as the scratches mount up, the new ones add less and less new distress. The seventh may elicit nothing more than an irritated shrug. So the relief that comes from repairing the very first scratch that the car sustained will be greater if the other six are also being fixed than if the other six are not.
Turning to a different kind of mental discomfort, paying the first bill in a stack of overdue bills does little to relieve a guilty conscience. Having nine overdue bills is only a little less uncomfortable than having ten. But paying the last bill in the stack and moving from one to none is normally a big load off one’s mind.
How are “pleasers” different?
These are goods that cause positive experience, as distinct from removing negative experience. Examples might include a glass of wine along with a meal or a portion of ice-cream at the end. To lose or not to have a pleaser is not an evil but only the undoing or absence of a good. Interestingly, while the word “reliever” is a natural name for things that undo the effect of evils, there does not seem to be a name for things that obliterate the effect of pleasers, other than “killjoys,” perhaps.
Unlike relievers, pleasers do generally conform to the law of diminishing marginal utility. That is because what the limits of human attention are diminishing in this case is objects with a positive charge. Virtually all introductory economics textbooks remind students of the psychological impact of successive pleasers that are familiar from everyday experience, things like desserts and movies, to win support for the law of diminishing marginal utility. Students readily agree that the third helping of dessert brings less pleasure than the first, and so forth. But the textbooks do not recognize that significant classes of goods are not pleasers (or not pleasers at all levels of consumption—see below), and so they claim far more generality for the law of diminishing marginal utility than they should.
At first glance, none of this has anything to do with poverty. But Karelis says otherwise, because many goods switch from relievers to pleasers as their quantity increases.
Reliever/pleasers do not fall completely into either of the preceding categories. Rather they are relievers at low levels of consumption and pleasers at high levels of consumption. Examples include many “basic” goods—things that benefit virtually all consumers: food, shelter, clothing, transportation, leisure, and opportunities to take part in community life. Characteristic of these goods, besides being generally valued, is that they can be used or consumed at three levels: insufficient levels, where shortfalls make for misery and more consumption makes for relief; sufficient levels, which cause neither misery nor positive pleasure; and above-sufficient levels, where the consumer takes a positive enjoyment or satisfaction from consuming them.
Again, the set of goods that serve as both pleasers and relievers includes many basic goods…
The “dual citizenship” of goods of this third type shows itself in their marginal benefit. They act just like pure relievers when insufficient amounts are being consumed, which is to say they yield increasing marginal benefit. But they act just like pure pleasers when it is more-than-sufficient amounts that are being consumed, which is to say they yield diminishing marginal benefit… For this class of goods, in short, the applicable generalization is not the law of diminishing marginal utility but a law of diminishing marginal impact of deviations from sufficiency.
Why then do the poor persistently make impoverishing choices? Because they’re way down in the “reliever” segment of the reliever/pleaser continuum. The marginal benefit of doing better is trivial; their only hope of getting to a tolerable position is to make big risky bets. If they lose, they’re only slightly worse off (because they’re already near maximum misery); if they win, they can have an OK life for a while.
To be more specific about non-work, the postulate of increasing marginal utility makes sense of the fact that very poor people are less likely to exert themselves for money than others. After all, they stand to benefit less from a given addition to their income than not-so-poor people do—not more, as conventional wisdom would have it. So at any given wage, they stand to gain less from an hour of paid work. Recall the person with seven bee-stings who would not sacrifice much to relieve the sting on his hand, seeing that the pain of it was drowned out by the pain of the six stings on his body. This would seem to be the position of very poor people, for whom work, school-work, and (in a much different way) moderation in alcohol use constitute sacrifices that would buy them too little felt relief to be worth making, so many are their troubles.
To be more specific about consumption smoothing, the postulate of increasing marginal utility amid poverty can also rationalize the fact that poor people are less likely than others to save for a rainy (or rainier) day, because, according to that postulate, leveling income down wastes some of the relief that could have been wrung from the sum of the available resources over time. The poor person whose income varies for reasons beyond his control is like someone who awakes every morning with two stings that will hurt all day if not treated with dabs of salve, and who awakes every second day with two dabs of salve on his bedside table. Seeing that two stings are less than twice as painful as one, relieving one is less than half as beneficial as relieving two. So it would be a waste of potential relief to lay aside one dab from the pair he gets on alternate days in order to smooth consumption at the level of one dab per day. At the end of a month, in other words, the same number of dabs will be consumed whether the pattern is 2-0-2-0 . . . or 1-1-1-1 . . . , but the total amount of relief is greater with the first pattern than with the second.
What, however, determines when a good switches from reliever to pleaser? For Karelis, it mostly comes down to what people in your society take for granted. Thus, we should not be surprised to see poor immigrants striving for success while seemingly similar natives shrug:
No one doubts that different cultural groups within the United States have different histories, and that these different histories create different economic norms and expectations. For instance, having come from much poorer countries, Asian immigrants to the United States often have relatively low norms and expectations. By contrast, African-Americans, who are closely acquainted with the lifestyles of middle-class whites, and who have long been exposed to “the American dream” and all it implies, often have relatively high norms, if not exactly expectations. As a result, Asian immigrants with low incomes are probably less unhappy with their economic situation than African-Americans in similar straits. When taken together with our hypothesis that the marginal benefit of income is increasing for poor people, this difference in norms and expectations predicts that the felt relief of the marginal dollar will be greater for poor Asian immigrants than the felt relief of the marginal dollar for similarly poor African-Americans. So we should expect poor Asian immigrants to be more willing to do low-wage jobs than equally poor African-Americans. This predicted situation is precisely what we see in fact.
Karelis provides many more details, but we’re basically done. Yes, poor people could improve their condition emulating the behavior of the middle-class. But they reasonably spurn this genuine opportunity, because even if they did everything right, their gain would be smaller than their sacrifice. Being poor is so awful that solving half your problems is barely better than solving none of your problems.
READER COMMENTS
Mark Z
Aug 8 2019 at 11:13am
A possible alternative (or supplemental, as it’s not mutually exclusive) explanation: consumption of salves may not have increasing marginal utility, but merely increase the cost of other goods/services. For example, the longer you go without working or the more crime you commit, the more you would have to work in order for your labor to be worth what it was when you started, to the point where the marginal cost of the substitute may even increase faster than the rate of decline of the marginal utility of the salve. Each unpaid bill makes it harder to repair ones credit; financial irresponsibility increases the cost of becoming recognizably financially responsible, so the relative preferability of the former to someone who already struggles with delayed gratification increases. With drug use, of course, both factors are at play (addiction being a clear case of increasing utility).
An objection I have with Karelis’s theory though is that it would seem to expect a rich person who becomes very poor to ‘give up’ like already poor people do, while poor people who become well off should likewise exhibit altered preferences. Perhaps he thinks behavioral preferences reflect not so much one’s current relative wealth as that of one’s upbringing or socioeconomic class, but to the extent that that’s so, it becomes harder to distinguish what is evidence for his theory from what is equally evidence for a theory where causality runs entirely in the opposite direction, i.e., where poverty has no causative effect on such poverty-inducing preferences, but is merely caused by it, and the preferences are caused by something else (or are even just innate personality traits).
Nick Ronalds
Aug 8 2019 at 11:22am
My impulse is to be skeptical and look for objections, simply because it all sounds a bit far-fetched, i.e., at variance with the models of economics I studied. But one (happy?) consequence of following Econlib is that I’ve discovered that some of my strongly held views were wrong. Scott Sumner’s views on monetary policy are one example, and Bryan’s on education another. So I resist to impulse to list possible objections and will instead let this marinate a while. Certainly Karelis’s account of the increasing marginal benefit of “relievers” makes some sense.
Daniel
Aug 8 2019 at 11:36am
This is Prospect Theory with the reference point being sufficiency rather than the present state. Poverty is constantly experiencing deep psychological “losses,” so I’m risk-seeking. Wealth is constantly experiencing strong psychological “gains,” so I’m risk-averse. Quite literally we have reductions in a loss (relief) and additions of a gain (pleasure).
The values of the parameters on this valuation function could depend on things like immigrant status or prior standard of living, etc.
JFA
Aug 9 2019 at 9:49am
I’m glad someone caught that. The funny thing is that this would fall into the “unusual preference” category from the perspective of standard utility theory.
I will add that I don’t buy this explanation at all. So the marginal benefit of working 1 hour extra is less than working 2 hours extra is less than working 3 hours extra, etc., up to a point where the pattern reverses. If this is your theory, you would expect to see people who can only get less than a certain amount of work X to work very little, after which people are super eager to work (due to increasing marginal utility) up to point Y, where workers reach a diminishing return from the extra wages. So the people to the left of X seem to fit Karelis’ model until you come back to a rejected explanation: restricted opportunity.
Going back to the bee sting example, he is right to suggest that applying salve only to one sting won’t do much of anything. But then why would a person only apply one salve and not 3 or 4 or 5? Is it because that person does not have the opportunity to get those salves? Or let’s say this person finds some relief in treating one bee sting. The person decides to treat a second one and realizes that the relief provided by this second salve is more than the relief provided by the first. They are now eager to get another salve to treat the third sting. “OMG! that feeling is amazing, I must get another salve to treat the 4th sting!” Now apply this to paying off bills. Maybe the person has a low marginal utility from paying off the first bill, but once they pay off a second bill, they are hooked. That doesn’t sound like the poverty-inducing behavior Karelis is describing.
John Alcorn
Aug 8 2019 at 1:01pm
Karelis rejects standard explanations (apathy, lack of opportunities, etc.) of the nonbehaviors (not working, not saving, etc.), which largely cause persistence of poverty, and offers a complex situational theory of marginal utility as a parsimonious (general) alternative explanation of those nonbehaviors.
Karelis presents a false dichotomy. Instead, his real accomplishment is identification of another mechanism (situational marginal utility), which, together with the standard mechanisms, makes the catalogue of pertinent mechanisms more complete.
In a previous comment in the book club, I noted that the social sciences are more like chemistry than physics. Commonplace phenomena, such as the nonbehaviors associated with persistent poverty, can have a variety of causes (recurrent psychological and social mechanisms). A specific cause or mechanism (e.g., an atypical preference, such as extreme aversion to submission to authority) has explanatory power insofar as it substantially increases the probability of the effect (for example, not working). Several mechanisms jointly can make nonbehaviors associated with persistent poverty very probable.
This causal density and the idiosyncrasy of historical context can make accurate empirical estimation of the explanatory power of each mechanism difficult or impossible.
Nonetheless empirical studies of mechanisms are sometimes feasible and fruitful. Compare, for example, Bryan Caplan’s book, The Case Against Education, which identifies three mechanisms (ability bias, human-capital formation, and signaling), which help to explain the education premium in labor markets. Bryan provides empirical estimates of each mechanism’s explanatory power in a variety of contexts. Similarly, I hope that Bryan’s new book project, about poverty, will clarify a wide range of pertinent mechanisms, and provide systematic evidence of their explanatory power.
sourcreamus
Aug 8 2019 at 1:05pm
A more plausible explanation is the opposite. The poor don’t take enough risk.
When I was taking a college class that involved living in an inner city for a couple of weeks one of my fellow students asked some poor locals kids why they didn’t study more. There answer was that they were living for today because they could get shot tomorrow. Such a belief has obvious implications for risk taking and investments.
Scott Sumner
Aug 8 2019 at 2:01pm
When I was a young adult, I had a very low income. At that time, the marginal benefit of extra income was much higher than when I became middle class. So I don’t believe Karelis’s theory.
DeservingPorcupine
Aug 8 2019 at 5:10pm
Yeah, that’s what I’m thinking. I remember being a relatively poor grad student, eating ramen and whatnot. The joy I gained from a “windfall” of working crazy overtime at the hourly side job seems disproportionately large.
Dylan
Aug 8 2019 at 7:09pm
I obviously do not know the details of your low income period, but if it is along the lines of being a “poor grad student” that feels qualitatively different than the type of poverty that is being described here. If you have a pretty clear view that there will be light at the end of the tunnel I don’t think this really applies to you. From my reading, it seems like the key operating assumption is a certain amount of hopelessness that gives rise to diminishing returns for some goods.
Perhaps an example that may resonate more with an academic, let’s say as a student for one reason or another, you missed the first few weeks of class and the midterm that’s worth 40% of your grade. Do you get a lot of return from studying really hard and getting an A on that quiz that is worth 5%? Or really busting your ass, showing up everyday, working hard to try and ace every test so that if you’re really, really good and lucky, you might pull a D- in the class? Or would you perhaps get a greater utility by skipping the rest of the class and going to the beach everyday?
John Alcorn
Aug 8 2019 at 2:24pm
In this comment I focus on the mechanism identified by Karelis, situational marginal utility.
In Karelis’ model, poor people think ahead far enough to maximize their utility from “relievers” (i.e., target a staggered series of local maxima, the 2-0-2-0-2-0 pattern), but not far enough ahead to behave in ways that make the transition from “relievers” to “pleasers” (i.e., target a long-term global maximum).
In the parlance of psychology, in Karelis’ model, poor people don’t engage in farsighted choice bundling.
However, choice-bundling is a well-known way to escape poverty. Consider, for example, one of the nonbehaviors associated with persistent poverty, not moderating alcohol consumption. John Monterosso and George Ainslie write:
If poor people think far enough ahead to maximize relievers, then why don’t more of them think still further ahead and invest in choice-bundling to escape poverty? Robin Hanson suggests that autonomous long-term choice-bundling might be an illusion, if culture determines behaviors:
Hanson’s story provides yet another mechanism: a tale of two cultures, perhaps not unlike Charles Murray’s Belmont and Fishtown.
But many individuals do rise above (or fall below) their cultural circumstances! My intuition is that two individual-based mechanisms—one the opposite of the other, but each quite plausible—are missing from the conversation: (a) Personality is destiny. (b) Free will.
robc
Aug 8 2019 at 3:10pm
Following up on Mark Z’s objection, this theory doesn’t hold for sports stars or lottery winners.
You have people who come from poverty who get the big hit that moves them from reliever to pleaser, and their behavior doesn’t change, it is only a bigger scale. And thus large numbers of them are in bankruptcy shortly thereafter.
Phil H
Aug 9 2019 at 1:56am
This theory seems consistent with the self-help/pop psychology mantra of setting achievable goals. If a goal like being financially stable is too far away to reach within a short time, working towards it can often feel demoralising rather than positive. And the existence of that goal kills other pleasures, too. I was trying to do an online degree, but couldn’t complete the work. It got to the point where just opening the website made me feel panicky; but I couldn’t relax and enjoy anything else because I had coursework to do. When the problem is money, the same issues apply, only worse.
I’m not sure if being consistent with pop psychology counts in Karelis’ favour or against him!
Weir
Aug 9 2019 at 1:59am
Philip’s a bad boyfriend. Not ambitious like Ted. Only four months after they’d met, Ted and Sylvia wed. Their honeymoon is in Spain. Whereas Philip has his little joke: “I wouldn’t mind seeing China if I could come back the same day.”
Ted makes a big splash on the London literary scene. Philip plods away in a library in Hull. Ted uproots himself, leaves the UK for the States, first for a place in Northampton, Massachusetts, and then Beacon Hill. Ted works and works and works, creating plays, radio plays, translations, books for kids and, back in Britain, he joins up with the BBC. Philip’s attitude is different: “Why should I let the toad work squat on my life?”
What would he gain? From Philip’s perspective, what’s the point of more work? He already has three girlfriends. Would a fourth and a fifth make the extra effort worthwhile? He’s openly selfish. He’s not interested in being a father or one more married man:
“He married a woman to stop her getting away
Now she’s there all day
And the money he gets for wasting his life on work
She takes as her perk
To pay for the kiddies’ clobber and the drier
And the electric fire”
And besides, he makes enough to buy what he likes. What Philip likes is loud brassy jazz instead of nursery songs. If he did write big blockbuster poems, what’d be his reward? Inland Revenue would love him, and punish him more. He’s not even poor. He’s just fine as he is. From Philip’s own perspective, he’s doing just fine.
The real question is: What’s driving Ted on? Why is Ted so ambitious? What does he think he’ll achieve?
nobody.really
Aug 9 2019 at 2:14pm
Sounds like you’re describing the backwards-bending labor supply curve. Basically, as workers grow richer, they want to consume more superior goods–including leisure. True, different workers will have different utility functions, and thus different preferences for exchanging income for leisure, but that’s the overall social dynamic of labor supply.
It also sounds like you’re describing Anthony and Sargent O’Leary. See, Anthony works in the grocery store, savin’ his pennies for someday. Mama Leone left a note on the door; she said, “Sonny, move out to the country. Workin’ too hard can give you a heart attack; you oughta know by now. Who needs a house out in Hackensack? Is that what you get for your money?”
Meanwhile, Sergeant O’Leary is walkin’ the beat, while at night he becomes a bartender. He works at Mister Cacciatore’s down on Sullivan Street, across from the medical center. He’s tradin’ in his Chevy for a Cadillac, but you oughta know by now. And if he can’t drive with a broken back, at least he can polish the fenders.
You should never argue with a crazy mind; you oughta know by now. You can pay Uncle Sam with the overtime; is that all you get for your money?
If that’s what you have in mind—yeah, if that’s what you’re all about—then good luck movin’ up, cause I’m moving out.
John Alcorn
Aug 9 2019 at 10:43am
In this comment I focus on Bryan Caplan’s takeaway from Karelis’ mechanism:
Is it really the case that a poor youth or young adult who does everything right will resolve only half of her problems and will remain mired in poverty? Consider the U.S. My non-expert sense of the evidence is that poor persons who finish school, work for pay, save for a rainy day, moderate alcohol consumption, and obey the law are very likely to escape poverty.
Perhaps we must add that a poor person also might have to be willing to migrate (within the U.S.) to opportunity or away from poverty. (There seems to have been a decline in migration away from poor regions.)
Perhaps a real mechanism here is that many poor people mistakenly believe that even if they do everything right, they will solve only half their problems and will remain mired in poverty. We are back to Robin Hanson’s conjecture that “cultures of poor people often don’t have standard cultural plans” for digging oneself out of poverty. If Robin is correct, I conjecture that cognitive dissonance reduction might be an underlying psychological mechanism in the process of false belief-formation: because escape from poverty is daunting, I persuade myself (unconsciously) that escape from poverty is improbable or impossible. A culture of pessimism can be self-fulfilling.
John Alcorn
Aug 9 2019 at 11:57am
A follow-up on Bryan’s takeaway from Karelis’ mechanism. In social-science research one should always ask, “Is it the case?,” even when a fact seems obvious. Therefore, we should ask: Is it the case that “Being poor is so awful”? Given that Karelis invokes survey evidence at various points in his analysis, we should check survey evidence on this question, too.
It happens that elsewhere Bryan Caplan has drawn attention to survey evidence from “happiness research,” including findings that indicate that being poor isn’t awful!:
How much credence should we lend this sort of survey evidence?
If the survey evidence is sound, then we have yet another mechanism whereby poverty persists: hedonic adaptation, which mutes motivation “to do everything right” or “to emulate the behavior of the middle class” in order to escape poverty.
I would add that many middle class behaviors might look crazy to the poor …
nobody.really
Aug 9 2019 at 2:33pm
Interesting conjecture: Maybe the poor remain poor because–they’re so rational?
The persistence of cognitive biases pose an interesting challenge for evolutionary theory: They suggest that certain beliefs, though objectively false, help a species survive and produce a next generation.
Consider affective forecasting–that is, a belief that our choices will have a large impact on our future happiness. Arguably this belief motivates us to try harder to shape our world. Yet as noted above, an individual’s long-term happiness seems to depend upon many fewer outcomes than many people imagine. To quote one of the great slacker movies of all time, for most things “It just doesn’t matter!”
Could it be that poor people have managed to transcend this cognitive bias, and grown more rational about what outcomes really affect happiness?
Then again, there have been many literary interpretations of mental illness–Don Quixote, Harvey, Equis–suggesting that madness is a form of utility maximization. Yet people who work with the mentally ill generally don’t share these benign views, and regard these stories as a kind of wish fulfillment projection. Thus, I approach the suggestion that poor people have radially different psychology with skepticism.
Mark Z
Aug 10 2019 at 3:15am
I don’t think it’s hard to imagine false beliefs being evolutionarily useful, so I don’t think it’s so much a challenge to the field of evolutionary psychology as it is to standard epistemology. Belief in an afterlife or karma may be conducive to cooperative behavior that is detrimental to one’s interests at the margin but beneficial to the population, etc.
One of my new favorite economists – Robert Sugden, writes a lot about social conventions form a game theoretic perspective as a means of solving coordination problems. Absent self-abnegation inducing convention, perhaps members of a community won’t behave in ways that accrue human or institutional capital, in contrast to a less ‘rational,’ religiously virtuous community. Or put differently, perhaps they live in a subculture where defection is a more common strategy in the perennial inter-generational prisoner’s dilemma. Though this type of cultural difference would require poor people to live in a distinct culture from rich people to really work, which is surely true to some extent, but also no where near completely true.
John Alcorn
Aug 10 2019 at 4:30pm
It looks like Bryan Caplan has completed the summary of Karelis on persistence of poverty. “Karelis provides many more details, but we’re basically done.”
Here I gather my preliminary takeaways from Bryan’s first three blogposts.
• Karelis bites the bullet and accepts behavioral explanations of persistence of poverty.
Karelis overstates the explanatory scope of behavioral explanations. Where general productivity is low (e.g., before the agricultural and industrial revolutions), only a fraction of the populace can escape poverty.
One of the five behaviors, “not finishing school,” is meaningless before the 19th (or 20th?) century.
• Upstream, Karelis argues that none of the standard explanations of these behaviors has much bite.
Karelis misunderstands explanation by mechanisms. He is a hedgehog, where he should be a fox. He seeks a parsimonious explanation; i.e., one big idea. However, persistence of poverty more plausibly has many causes. A cause or mechanism (e.g., hyperbolic discounting) has explanatory power if it substantially increases the probability of the effect (persistence of poverty) in context. Plural mechanisms cluster and interact to make the effect very probable. There are many ways to stay poor!
• Karelis’ big idea is situational marginal utility (relievers vs pleasers). Sacrifice is pointless because the mountain to climb is too high. Poor people make the most of what little they have by targeting local maxima (intermittent short-term relief).
Karelis identifies a fresh mechanism. However, this mechanism and the various standard mechanisms are not mutually exclusive. Each mechanism’s explanatory power will vary by context.
Karelis exaggerates the explanatory power of his mechanism. Many individuals in poverty do finish school, obey the law, work for pay, save for a rainy day, and drink responsibly (and migrate to opportunity or away from poverty)—and thereby escape poverty (i.e., climb the entire mountain).
• Karelis misses other mechanisms that help to explain why a subset of individuals in poverty don’t engage in long-term choice-bundling to escape poverty.
My intuition is that a cognitive mechanism thwarts many individuals, who form a mistaken belief/em> that they cannot escape poverty. These individuals overestimate the height of the mountain. Cognitive dissonance reduction can cause this false belief-formation. When behaviors to escape poverty are daunting, a subset of individuals gravitate to peace of mind by unconsciously persuading themselves that escape from poverty is improbable or impossible. This pessimism is then self-confirming.
Robin Hanson (channeling Charles Murray?) suggests a cultural explanation. Perhaps long-term strategic planning is an illusion, but some cultures have norms that mimic long-term choice-bundling; norms that say, “Finish school, get a job, obey the law, save for a rainy day, drink responsibly.” Poverty persists in cultures that lack these norms. But, again, we may ask: What about the many who do climb the mountain? Is culture really destiny? Plausibly, cultural norms are mechanisms that interact with the various other mechanisms in play to produce complex patterns of partial persistence of poverty.
• Two individual-based mechanisms are missing from the conversation: (a) Personality is destiny. (b) Free will (bootstrapping).
• Sound empirical estimation of explanatory power of various mechanisms in contexts of causal density is always hard, but sometimes feasible. An outstanding example is Bryan Caplan’s empirical study of three mechanisms—ability bias, human-capital formation, and signaling—in the education premium in the U.S. labor market. Bryan’s book-in-progress about poverty surely will make conceptual and empirical headway.
Ricardo
Aug 13 2019 at 4:43pm
I’ve used exactly this analogy with weight loss. If you’re 10 pounds overweight and you make some sacrifices and lose 10 pounds — awesome! If you’re 100 pounds overweight and you make some sacrifices and lose 10 pounds — so what? You’re still 90 pounds overweight. Why make the sacrifice?
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