The Persistence of Poverty: Karelis vs. Six Standard Stories

After you read Karelis on the behavioral causes of poverty, you'll probably assume he's some sort of social conservative. If you have the patience to hear him out, however, you'll discover that he's one of a kind; no earlier thinker ever thought what Karelis thinks.

Skeptical? After discussing how the poor make themselves poor, Karelis' next task is to examine the leading left- and right-wing explanations for persistent poverty. He breaks them into three "dysfuction" theories and three non-dysfunction theories - six in all: (1) apathy, (2) fragmentation of the self (economists might instead say "hyperbolic preferences"), (3) akrasia (non-philosophers would say, "weakness of will"), (4) restricted opportunity, (5) unusual preferences, and (6) perverse policies.

One way to classify these theories is by whether they treat the behaviors in question as stemming from psychological dysfunctions. Can the behaviors be traced to mental conditions that directly harm the possessor? Note that being dysfunctional in this sense is not the same thing as having preferences that happen to be socially disapproved, such as a strong preference for leisure over income—the so-called lack of a work ethic. Preferring leisure is often disparaged as a kind of flaw, but it is not a flaw in the sense that a dysfunction is. Dysfunctions are not preferences, even socially-disapproved ones, but conditions that get in the way of realizing preferences.

The dysfunction approach blames non-work and the other poverty- prolonging/poverty-worsening behaviors on several problems in particular. One is apathy. Others are fragmentation of the self, which leads to short time- horizons, and weakness of the will. Alternatives to dysfunctionalism naturally deny that psychological dysfunctions are key factors in causing these behaviors. Instead, they trace the behaviors to external circumstances such as restricted opportunity and bad public policy. Or they trace them to inner qualities that are not dysfunctions (in the above sense), such as the preference for leisure or a taste for the suspense and excitement of risk- taking.

Karelis then largely dismisses all six stories, insisting that none of them explains more than a tiny part of the puzzle of persistent poverty. His main objections:

(1) The poor do not in fact seem very apathetic.

[T]he apathy theory leads us to expect an affectless style of behavior among those poor people who engage in the poverty-lined conduct, which is by no means universally observed. No doubt some poor people who do not work are victims of serious depression, and some alcohol abuse seems to be self- medication for depression. But having a baby during one’s teens is not necessarily a gloomy affair. Likewise spending like there is no tomorrow is likely to be pretty lively while it lasts.

(2) The poor don't seem to have "fragmented selves," if the concept even makes sense:

[I]t leads us to expect that poor people who vary consumption regard their future interests casually, like Aesop’s grasshopper. For supposedly these interests are being viewed as the interests of a quasi-other. But on the contrary, uneven consumption on the part of the poor is often serious and deliberate… A contemporary example from the developing world, noted by Tibor Scitovsky in The Joyless Economy , is poor families’ common practice of deliberately depriving themselves over long periods for the sake of a feast at the end, for instance a wedding feast.

Another problem with the fragmented-self theory is that from a positivist standpoint, at least, the very notion of a “normal preference for income, weakly felt” makes little sense. For what scientifically measurable behavior can possibly differentiate a normally strong preference for income, weakly felt, from a preference for income that is simply weak?

(3) What about weakness of will ("akrasia")? Karelis doesn't really refute it (indeed, he defends it against two classic objections); he just tells us that once we hear his theory, there's no use for akrasia.

The overall problem with all three dysfunction stories, though, is lack of parsimony:

The existence of a few anomalies in a class of phenomena is not itself an anomaly. What critics find too complicated is that dysfunctionalism draws an implausibly deep distinction right down the middle of the class of human behaviors. It makes a big portion goal-directed and a big portion not goal- directed… Critics of the dysfunction theories contend that the postulate of such a deep division right down the middle of the class of human behaviors fails the test of parsimony. A simpler and therefore better theory would find teleological rationality—a striving to maximize one’s overall satisfaction—in almost all human behavior, or almost none.

What about the non-dysfunctional theories? They're largely wrong, too.

(4) The "restricted opportunities" story is either wrong or overstated to the point of implausibility.

The first of the alternatives says that poor people often engage in the poverty-prolonging and poverty-worsening behaviors because they do not have the opportunities that are available to others. The opportunity restrictions they face make these behaviors either (a) inevitable or (b) satisfaction- maximizing.

As version (a) would have it, the opportunity restrictions faced by many poor people are absolute, and their problematic behaviors are therefore unavoidable. Poor non-workers cannot find jobs; poor drop-outs have no chance to finish school; poor non-savers have no way to save; and poor criminals have no honest way to survive. (Alcohol abuse is not unavoidable, obviously. Rather it is usually seen as an indirect consequence of joblessness and low income.) So according to this theory the poor people in question make no decision that can be blamed on dysfunction. But version (a) does not seem to be generally correct for the United States today, however applicable it may be elsewhere. The cause of the problematic conduct may not be dysfunction, but it does not appear to be absolute lack of opportunity either. For instance, sheer inability to find work does not seem to be pervasive or even common. To take just one indication, according to 1996 U.S. Census data covering nonworkers between 20 and 64, only 8.2 percent of those lacking even a high school diploma cited inability to find work as their main reason for not working; and in the group with the hardest time finding work, African-American nonworkers, less than one in seven gave inability to find work as their main reason for not working.

More plausible for the United States today is version (b) of the restricted opportunity theory. This version blames opportunity restrictions that are less than absolute—though more serious than those faced by the non-poor. For instance, it says that while poor non-workers could usually find some job, the jobs available are backbreaking, dangerous, humiliating, badly paid or some combination of these negatives. So much so that self-interested poor people, who generally have typical tastes and tolerances, will naturally refuse to do them. For such people, going without and dependency are an acceptable price to pay for avoiding such work at such wages. Thus unpaid pursuits become for them relatively satisfaction-efficient uses of time and energy. Many middle-class readers have been persuaded of this view by Barbara Ehrenreich’s vivid bestseller Nickel and Dimed...

For brevity’s sake I will not detail this theory’s claims about the remaining poverty-prolonging behaviors. But it will say for instance that the educational opportunities available to the poor are so bad that staying in school past the required age is a worse use of time than going out on one’s own. It will say that poor people’s opportunity to save for a rainy day is restricted by the lack of secure savings vehicles, including the lack of banks in poor neighborhoods. Since the odds of someone’s losing a sum of money when he tries to save it without putting it in a bank are high, the impact on long- run satisfaction from not trying to save at all may actually be positive for poor people on balance. Similarly, the senselessness of regular work for many poor people removes a key deterrent to drinking heavily and pursuing income illegally.

What's so implausible about the latter toned-down version?

If the restricted opportunity theory correctly explained most of the behavior in question, then restricted opportunity would be a major factor in poverty itself. But consider the opinions of poor people themselves about the causes of poverty. They are in a good position to know the causes, and they would if anything be expected to over-blame opportunity restrictions for their poverty. But there is no consensus among poor people that restricted opportunity is the main cause of their poverty. In fact according to a survey already cited, only 57 percent think the main cause of poverty is any factor lying beyond the control of poor people, whether opportunity restrictions or bad public policies or other. Moreover, only 17 percent of poor people believe that “too many jobs being part time or low-wage” is the most important cause of poverty—fewer than blame drug abuse. And as for saving, 89 percent of poor people said there was a bank convenient to them, hardly less than the 93 percent of respondents with incomes above the poverty line.

(5) The "unusual preferences" story is straightforward, but it's so heretical you may never have heard a smart person earnestly defend it.

This theory grants that the poverty-prolonging/worsening behaviors often seem to depart from ordinary human behavior by wasting a lot of possible satisfaction. But, says the theory, this is an illusion that arises because we overlook the difference between typical preferences and the preferences of poor people who engage in these behaviors. For instance, poor people who devote most of their time to unpaid pursuits generally do so because they get exceptional satisfaction from some alternative to work, such as staying home and raising their children, or because they suffer exceptional misery from working. This makes poverty the best available option for them…

A similar claim is made about seeming under-allocations of time to education and the work of learning, which are notoriously distasteful to some people. As for seeming over-allocations of money to certain time-slices of the self, i.e. not saving, this might reflect a strong dislike for planning and a preference for living in the present. The life of habitual criminals has often been said to reflect a positive appetite for the forbidden and for the uncertainty of the outcomes. In short, all of the questionable, poverty-prolonging behaviors can be re-seen as benefit-proportional and hence rational allocations if we take into account the atypical preferences of the poor people who act in these ways. Or so this theory holds.

What's wrong with it? It contradicts survey evidence, and lacks parsimony:

One objection to the atypical preferences view is implicit in survey evidence. This evidence shows that large majorities of poor people and non- poor people alike think poor people have the same “moral values” as other Americans, presumably including the work ethic. Moreover, as already reported, “Ethnographers generally find that the poor endorse the same values as the better-off.” What is more, the meta-principle of parsimony should incline us to seek explanations for the behavior that minimize the variables that have to be postulated. Unusual tastes and preferences, whether located in the individual or in the culture to which the individual conforms, are precisely the sort of variable we should try to omit from our explanation of poverty, absent overwhelming evidence for them.

(6) Karelis denies that perverse policies explain much. Why? Above all, because we see similar patterns throughout history and around the world, whether or not the welfare state exists:

Once again, the survey data do not support this theory. For example, in the survey already cited, poor people themselves ranked the welfare system dead last among ten major causes of poverty. Perhaps this is to be expected, given their interests, but there is another problem too. Non-work, school quitting, and other poverty-linked conduct are both perennial and common today in societies that lack robust systems of public assistance, such as those studied by Oscar Lewis. Must supporters of the perverse incentives theory say that the problematic behavior has different causes indifferent times and places? It is possible, but the principle of parsimony creates a presumption in favor of global and perennial explanations for global and perennial phenomena.

Readers will no doubt find at least one of Karelis' counter-arguments perfunctory. The more you read him, however, the more you realize that he's several moves ahead of you. He just thinks that his own theory is so compelling that reasonable people will no longer even want to defend the alternatives. What in the world could this theory be? Stayed tuned.

The post The Persistence of Poverty: Karelis vs. Six Standard Stories appeared first on Econlib.

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