How Poor is Poor?

EconTalk Extra
by Amy Willis
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Angus Deaton on Inequality, Tr... Chris Arnade on the Mexican Cr...
pinky.jpg Should economists rethink the widely held view that redistribution from rich nations to poor nations makes the world a better place? 2015 Nobel laureate Sir Angus Deaton thinks so. That's the topic of conversation in this week's EconTalk episode.

So are you a cosmopolitan prioritarianist? A try-it-out-atarianist? Do you feel more sympathy for your fellow countrymen or those in the poorest parts of the world? As always, we'd love to see your response to this week's conversation...Let's continue it here.

1. Why does Deaton think making the claim that everyone is better off as a result of trade and globalization is "intellectual hucksterism," and to what extent do you agree?

2. Roberts imagines a farmer in 1900 being offered the following bargain:

A farmer in 1900 who is told, 'I have bad news for you. Your sector is going to be devastated by technological change. Your children and grandchildren will not grow up to do what you do and what you dream of them doing. But don't worry: here's what their life looks like,' they wouldn't say, 'Oh, that's a terrible deal. Don't do that to me.' They'd say, 'Thank you. My children will live long. They will have rich lives of meaning. And they will also have tremendous material wellbeing.'
While Roberts feels sure of this, Deaton is skeptical. To what extent do you think these hypothetical 1900 farmers would react this way, and why?

3. One of Deaton's main assertions is that people can (and indeed ought) feel more sympathy with those closer to us. Another famous Scotsman, Adam Smith, wrote the following:

Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own. To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference?

What does make this difference, and how does this description of man's natural sentiments apply to the question of cosmopolitan prioritarianism raised this week by Deaton?

4. How has this episode change the way you think about the poor and how best to help them? Some additional food for thought:
  • Whether we decide to attend more to our neighbors or those whom we don't know, how do we know who's really poor? Deaton argues that the poor in America are incorrectly perceived to be better off than they are. Morten Jerven, in this 2015 episode, argues that Africa is experiencing much higher growth and standards of living than we typically believe.
  • And even if we can determine who's really poor, how do we know that our efforts to help are truly effective? Will MacAskill argues most aren't, in this 2015 episode. So how do we best direct our efforts? Would Deaton agree with MacAskill?

Comments and Sharing


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COMMENTS (4 to date)
Rajanikant Mohan writes:

1) Agree, but it is inevitable in public debates which will influence a countries Free-trade policy.
Public debates (in an attempt to simplify the topic) speak in terms on black and white. No room for shades of gray in editorials of newspapers.

2) No need to go back to 1900, you are seeing this now in India. Agriculture is transforming and the % of workforce in agriculture is gradually reducing. Key word being gradual, when the young see better opportunities and quality of life in the cities and move. The current generation of farmers will fight change. The issue is no one knows or will believe the "here's what their life looks like" argument.

3) ...

4) I am surprised how many poverty is often hidden from sight in US compared to Europe. If the citizens don't encounter poverty on their daily lives - will they not lose their propensity to help. Then the local government needs to step in to provide basic social support. Over last few years, I am starting to believe its not such a bad idea for the govt to provide humanitarian aid, even if they are ngoing to be pretty in-efficient about it.

Ed writes:

I agree with both Russ and Sir Angus that the transfer of wealth is not from the first world countries to the poor individuals of the third world but instead it is hijacked by corrupt politicians, military, and aid agencies to their own ends.

The world boycotted blood diamonds, should not the next boycott be to aid organizations like UNICEF, the Clinton Foundation, etc. be next?

SaveyourSelf writes:

4) This episode and the next both touched meaningfully and artfully on poverty. Looking for a cure for poverty has been an obsession of mine since childhood, probably since I was taught in church that failure to help the poor is an offense punishable by eternity in hell (Luke 16:19-31). As bad as that sounds, the Bible’s prescription for how to help the poor was/is confusing. Like in Matthew 19:21 where, “Jesus answered, ‘If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me.’” But if the rich man sold all his possessions and gave away the money, wouldn’t he then be poor? How is that an improvement? Anyway, the bible convinced me that care for others, particularly the poor, was, at a minimum, a noble effort.

Then there was the government run schools, where I was taught great respect for the American Indians of the past, great sorrow at their treatment during and after the wars of occupation, and great concern that they have persistent poverty and widespread alcoholism in the present. I want to help them, but feel impotent since giving back an entire nation does not seem a viable option.

Studying economics gave me great hope in the beginning as a tool for helping the poor but has proven nearly as frustrating as the bible or the government school. Thomas Sowell taught me that many of the poor are poor only temporarily and by necessity, that they are simply young people at the beginning of their learning arc and, given time, they will leave poverty spontaneously. But that’s not the only kind of poverty. I’ve met poor people who come from multiple generations of poverty. They never escape. Interestingly, they often come to the doctor in large groups, even when only one of their party needs to see the doctor. The great-grandparents, grandparents, parents, and children all pack in the same room while one of their number is seen. And they are all clearly poor. I’ve wondered if such people are passing along poor genes or passing along poor habits or if the government’s welfare program pays them to remain poor or if there is some other explanation for their persistent poverty.

Last week I started reading F.A. Hayek’s, The Fatal Conceit while also listening to Econtalk. Something in the Econtalk conversations caused a particular passage in The Fatal Conceit to tug my attention. Hayek wrote, “The extended order depends on this morality in the sense that it came to being through the fact that those groups following its underlying rules increased in numbers and in wealth relative to other groups.” I haven’t slept well since. I wake up each night with the implications of this proposed causal chain exploding in my mind.

Hayek's conception of morals--if I understand correctly--was secular. To him, morals were rules of behavior, most often prohibitions against certain categories of behavior. He further proposed that morals set limits on what kind of complex structure a society can assume and that the ultimate structure defined the wealth a population can create or discover or manage or whatever it is that complex structures do for wealth.

If he is correct--that morals cause differences in wealth between societies--then rules of behavior might also explain differences in wealth and poverty inside a single society. Thus moral stagnation would explain why the American Indian’s and the Australian aborigines remain poor in spite of being located in some of the wealthiest countries in the world. The Indian's and Aborigines remain physically separate in those countries, which probably allows them to, to an extent, keep their old moral systems. Moral differences could also explain why inner city slums and poor rural towns produce "cycles of poverty." The people in those places probably share a similar moral code. Same issue with prisons. Moral differences could also explain why there is so much violence and drug use in the poorest segments of America. Those behaviors cause the poverty. And morals could even explain why socialism persists in spite of the fact it causes the very poverty it seeks to solve. Socialism is based on a primitive, instinct-derived moral system which endorses behaviors like altruism and group decision making—behaviors ideally suited to small groups, and likely sewn in our genetic code, but unsuitable for large groups of strangers.

The implications are vast are breathtaking. Case in point: Every single day people come to my ER with difficulty breathing and cough, yet they smoke. I tell them that smoking causes difficulty breathing and cough, so they should stop smoking. Logical connection in my mind, yet the smokers are rarely satisfied with my solution. To my eye, they have the key to solve their own problem for free, but pay me--a lot--to find a short term solution to their long term problem. Thus they pay for cigarettes, they pay opportunity costs in the form of decreased productivity from lung failure, and they pay me to operate as a crutch to their self-inflicted injury. There is strong evidence that a universal avoidance of most drugs and cigarettes specifically would unquestionably increase average life span and productive potential and therefore wealth.

Still, even if the association between morals and wealth is strongly causal, humility and caution are in order. Alcohol is a neurotoxin. Damaging the brains of members of society cannot possibly have a positive effect on societal wealth. Thus, I would have predicted that a societal ban on the use of alcohol would have produced an overall improvement in societal affluence, and perhaps it did, but it also led to—so far as I know—an increase in organized, violent crime, which is harmful to society. There are many lessons in that story. Perhaps one is that morals, effective or not, must be voluntarily adopted to produce best possible results. Another lesson might be that people will resist change, even when the change is unquestionably proven to causally produce the outcomes they desire most.

Which leaves me thinking that if changing morals could alleviate poverty—that if poverty is in fact a symptom of an inferior moral code of behavior—then knowing that for certain might not alleviate poverty. Still, it would go a long way towards alleviating the guilt I feel for the poor. It would be their choice at that point--no longer my responsibility.

As a side thought, wouldn’t it be wonderful if Economics ceased being the dismal science and instead grew to be known as the moral science?

Dave Hamilton writes:

Number 2 seems easy enough to answer. I cannot know for certain what anyone of my ancestors would have thought of how I live now. However, if I was brought back in 200 years and the living standards of my descendants had improved as much as ours has since 1900 I wouldn't give a damn about how they made their living assuming that it is ethical like the way I earn mine. I would be ecstatic and extremely happy for them...and possibly a bit jealous.

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