Thursday, July 26, 2012

Caplan on the poor

I had started a response to Caplan's recent posts on the poor (starting here), taking issue with his view and some things expressed by Matt Yglesias (who makes a lot of similarly bad inferences about unemployment because he's stuck in partial equilibrium thinking about what happens in the labor market after a wealth shock). I dropped it after a little while, but now that Bryan has put more out I want to say at least a little.

Caplan's has been arguing that you can't really balme destructive practices on poverty (thus sympathizing with poor people who engage in those practices) if the practices themselves would help lead people out of poverty. For example, drug use can't be blamed on poverty because a poor person would have an interest in not doing something that would help them emerge from poverty. He suggests looking for a common cause like low IQ, low patience, or irrationality. Like so many of Caplan's arguments, this is fine to a point. If we're specifically thinking about poor people one need only look at the homeless - the extreme poor - to see the role that IQ and mental health can play in driving both poverty and substance abuse. Clearly  it's going to play some kind of role further up the income distribution too. Just like signalling as an explanation for some of the returns to education, I don't think anyone disputes this.

But it's a thin reed to build an entire view of poverty around.

One point I want to particularly emphasize is intergenerational and institutional constraints. Children aren't naturally industrious, interested in building human capital, or even aware of the costs and benefits of doing so. A lot of early human capital investment occurs because parents insist on it, and good habits are developed over time. Sometimes, of course, a parent may want to invest more in their child but are unable to provide it or are unable to move to a neighborhood or school district where it is provided. This might be because of social constraints on the parent (both public and private), but perhaps it's because the parent is just plain no good at being a parent.

The point is, by the time a child has the opportunity to remedy an underinvestment like that, it's probably too late for them to fix all of it. At the very least, obstacles to the pursuit of success by young people is highly unequal across the income distribution. For upper middle class youth, you practically have to work at failing. A lot of youth in the upper middle class don't even contemplate what other paths they could take until they're already enrolled in college, and while I'm by no means a "college for all" type, that's still more or less a ticket to a decent life in America, if you want it. Lower income youth don't automatically get shoved through this sequence - either because their parents don't care or are irrational (more of a Bryan Caplan argument), or because they are unable to. This predisposes them to be in the same position as their parents.

Of course you can still better yourselves. We're dealing with a distribution here, and people move both up and down that distribution regardless of the path their parents set them on. But they don't make those decisions on an equal footing or as a blank slate. And if groups of people in this position are segregated, the problem is enhanced by the fact that youth can't rely on a wider social support network when their parents fail them.

These problems, of course, reproduce themselves. These children then have children in the same position that are instilled with the same human and social capital and the same limited family resources to draw on.

One of the most critical behavioral characteristics, of the ones that Bryan lists, is probably low patience - high discount rates. Certainly over time the people who climb out of poverty are going to be the ones with particularly low discount rates and those who fall in (or stay in) poverty are going to be those with particularly high discount rates.

I have no idea how much of a person's discount rate is heritable and how much is environmental. Certainly it's going to be a mix, but I don't know what that mix is.

But the point is, even if it's 100% heritable, intergenerational transmission of human, social, and financial capital combined with segregation is going to add an additional burden on anyone unlucky enough to be born into such a circumstance.

And "luck" is th right word. No child has any control over being in such a circumstance.

So Bryan is I think making both an obvious and a wrong point. Obviously factors drive both the actions of the poor and poverty itself, and it can be spurious to attribute all of the poor's actions on poverty itself. But simply noting that there is some spurious corelation is not sufficient for Bryan to dispute the status of the poor as victims.

A lot of my views on poverty and inequality come from especially from Charles Tilly's book Durable Inequality and also Deirdre Royster's Race and the Invisible Hand. I often side with economic against sociological arguments for social phenomena, but this is one area where I think socioogists provide some very convincing arguments that beat out a lot of what the economists have to say.

1 comment:

  1. I am reminded of a quote that I heard attributed to G. B. Shaw: "Society is like a cup of coffee. The dregs sink to the bottom and the scum rises to the top."


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