The Causes of Poverty (35): The Membership Theory of Poverty

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causes of poverty / economics / equality / housing / poverty / trade / work

When you read about the causes of poverty you’ve probably convinced yourself that there are causes, and that the poor don’t have only themselves to blame. What you’re most likely to find are the following causes:

  • culture (for example the religious hypothesis of Max Weber)
  • geography, climate, resources (most notably in the work of Jeffrey Sachs)
  • institutional, political and governmental causes (e.g. the resource curse, the role of the rule of law and economic freedom etc.)
  • education
  • sociological causes (e.g. family structure)
  • etc.

(There’s a summary of possible causes here).

It’s less common to find discussions about group affiliation as a cause of poverty. The group membership theory of poverty states that some people are poor because of the dynamics of the group(s) to which they belong. The groups may be residential areas (“ghettos”), schools, ethnic groups, workplaces etc. Poverty in this sense is “contagious”, hereditary, and self-perpetuating. It’s an example of a poverty trap.

This membership theory of poverty has a certain intuitive appeal to it. Group membership influences individual behavior and individual outcomes in various ways, so it wouldn’t be surprising to see that it influences economic status as well.

How do groups exert a negative influence over their members’ economic status? Peer pressure plays a role. The choices of some members of the group become the “natural” thing to do. The desire for social acceptance can force individuals to mimic their peers. Something similar occurs with role models. The behavior of older group members or members with some form of authority becomes standard behavior. Furthermore, when people witness high rates of failure among members, this will negatively affect their aspirations and effort. Finally, social and economic activities are highly complementary. When few group members start businesses for example, few other members will have the opportunity to work for them or trade with them. Conversely, when many members engage in economically destructive activities such as crime, other members may have no other economic opportunity than to collaborate.

You may ask, if groups are so bad, why don’t people just get out? Of course, it’s not always as easy as that. When you live in a crime infested ghetto, you don’t just move uptown. People will need some form of help. In order to break negative group dynamics, you can either work on these dynamics themselves (provide better education, crime protection, economic opportunities, affirmative action schemes etc.), or you can try to influence the prior group affiliation. How do people end up in a harmful group in the first place? There may be some room for government intervention. There’s the example of school desegregation through busing in the U.S. (not highly successful however). Governments can also tweak their social housing policies. Such policies are often called associational redistribution. One should be careful, however, not to cause harm elsewhere. There’s still a right to freedom of association and a right to privacy. Governments shouldn’t mess too much with group membership.

If you want to read more about the membership theory of poverty, I recommend two papers by Steven Durlauf, here and here. Those papers also contain an overview of the empirical evidence.

7 Comments

  1. Pingback: Some Theories on the Causes of Poverty, Ctd. | P.a.p.-Blog, Human Rights Etc.

  2. Brian Jacob in March 2004 AER, “Public Housing, Housing Vouchers, and Student Achievement: Evidence from Public Housing Demolitions.”

    Some have blamed public housing (projects in the United States) for establishing this group association dynamic that does not affect similar socioeconomically poor individuals. The study looks at living in homes that are demolished within a certain housing project in Chicago and finds that association with a project has no effect on future outcomes.

    This could mean one of two things (if you believe the results of the paper are reasonable):
    a.) the membership theory is smaller than expected
    or (probably more likely):
    b.) being poor as a whole, receiving welfare, public housing, lower education, etc. are MORE of a membership than being in a particular housing project (only the worst ones were demolished)

  3. Pingback: The Causes of Poverty (15): A Culture of Poverty | p.a.p.-blog | human rights etc.

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