Following an earlier post, some more evidence free musings on the causes of poverty. Theories about the causes of poverty typically fall into two camps:
- either the poor are victims of circumstances that are irrational (trade restrictions, misguided government policies, etc.)
- or the irrationality is situated within the minds, lifestyles, behaviors and values of the poor whose lack of rational calculation and foresight condemns them to a life of poverty.
Theory 1 describes the poor as people who satisfy the commonly accepted economics paradigm of the rational economic actor, but who also face economic or political structures that make it difficult for them to reap the usual benefits of rational self-interested economic interaction in a mutually beneficial market. Theory 2 blames not the dysfunctions or imperfections of the market and of government, but the dysfunctions of the self-destructive individual.
Poverty alleviation in theory 1 means market corrections or improvements in government (redistribution, market liberalization, breaking poverty traps, institutional improvement, the struggle against corruption etc.). In theory 2, it means better education, family planning and perhaps even psychological and paternalistic guidance. Some will go to extremes such as sterilization or eugenics. In the immortal words of Oliver Wendell Holmes:
Carrie Buck is a feeble-minded white woman who was committed to the State Colony… She is the daughter of a feeble-minded mother… and the mother of an illegitimate feeble-minded child… An Act of Virginia, approved March 20, 1924, recites that the health of the patient and the welfare of society may be promoted in certain cases by the sterilization of mental defectives… We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. Jacobson. v. Massachusetts, 197 U. S. 11. Three generations of imbeciles are enough. (source, source)
That’s not so popular anymore these days, fortunately, and invasive actions like these or like the aboriginal “Stolen Generations” are widely condemned. And yet, extremely paternalistic interventions still occur (take for example the current Australian aboriginal policy, aptly called “the intervention“).
Theory 1 seems to blame “society” for the fate of the poor, and this violates some of our philosophical intuitions about (limited) self-control and self-responsibility. Theory 2 seems very cold-hearted and even classist, and violates moral intuitions about the requirements and consequences of living together. That’s probably why the most common view is a mix of both theories (call it theory 3). Most of us believe that poverty has multiple causes and that these causes can be situated both in the economic-political structures and in individual psychology and behavior, in varying degrees depending on the specific cases.
However, there’s also a theory 4, described in this paper, and it’s one that avoids the (partially) paternalistic, classist, anti-activist or anti-individualist pitfalls of the previous three theories:
The behavioral patterns of the poor, we argue, may be neither perfectly calculating nor especially deviant. Rather, the poor may exhibit the same basic weaknesses and biases as do people from other walks of life, except that in poverty, with its narrow margins for error, the same behaviors often manifest themselves in more pronounced ways and can lead to worse outcomes. (source)
So the poor only give the impression of being deviant and self-destructive. They are, but not more or less than anyone else; it just shows more. For example, many poor people fail to open a bank account, notwithstanding the large benefits and the low costs of doing so. That failure is self-destructive because it increases the cost of payments and revenues, something the poor can afford least of all. However, this doesn’t prove that the poor are particularly self-destructive people. It only shows the effects of minor and universal human failures, such as embarrassment (when faced with a bank teller), short-termism, time preference etc., failures which happen to have graver consequences for the poor than for the rest of us because of their smaller error margins.
More on the causes of poverty here.