At a conference I attended in May 2012, Charles Karelis, author of “The Persistence of Poverty,” demonstrated what is wrong with much thinking about poverty, using a simple analogy. Suppose you are stung by a bee, and you are offered enough salve to relieve the pain of that sting. Most people would consider that daub of salve to be worth quite a bit.
Now suppose you have seven other bee stings. Will you still value a
daub of salve sufficient to relieve one sting as much as you did when you had only one sting? If you think about it, you will value that one daub less because it will do nothing to relieve the seven other stings that remain.
Now suppose with these eight stings that you are given salve for seven stings. Now you have increased motivation to relieve the one sting that
remains because that additional daub will free you from pain. This simple example is an important exception to a widely accepted principle of economics, the principle of declining marginal utility.
According to this principle, the more you have of something, the less each additional unit is worth at the margin. For example, after you have had one piece of cake, the second is worth less to you than the first. After two, a third is worth even less.
The principle of declining marginal utility applies well to what Karelis calls “pleasers,” such as the dessert example. But it does not apply to what he calls “relievers,” such as the sting salve. In the case of relievers, the more you have of something, the more an additional unit is worth at the margin. The utility of that last daub of salve is worth more to you, not less, than the first daub, because the last daub is the one that gets you out of misery.
Now it turns out that many of the goods that matter to poor people are relievers, not pleasers, or they are hybrids, functioning like relievers when one has less than enough, and like pleasers once one crosses a threshold of sufficiency. Transportation is an example of a hybrid. If you have a 20-mile journey to work, you are not apt to pay bus fare for the first mile of the journey, leaving 19 miles to go on foot. But you might be willing to pay bus fare to relieve you of the last mile after having walked 19. And transportation beyond what you need declines in value.
Poverty means troubles, and like multiple bee stings, these troubles drown each other out. Relief from one problem will not necessarily be pursued by someone if she is left in other troubles. If we keep this in mind, Karelis argued, we can explain much of the behavior of poor people, not as due to some character defect, but rather as what any reasonable person would do in such circumstances.
Consider low-work effort. If money from work were a pleaser, than the first dollar should be the most valuable, and a rational person should be eager for work, no matter how poorly paid. But if money from work is only a
reliever, as it is for someone in poverty, then that first dollar won’t be worth much, like the first daub of salve, since it leaves one in a sea of troubles.
Or consider a failure to save. Saving makes sense as a means of deferring
consumption and as a way of insuring for unexpected shocks to one’s income from layoffs, illness and emergency home repairs. But when one’s current consumption is taken up with basic needs, the value of deferred consumption is much less. And it may be more rational to address the ups and downs of income shocks than to try to smooth out these shocks through saving.
Going back to the bee sting analogy, suppose you are getting two stings a day but have only enough salve for, on average, one sting per day? Are you going to relieve only one sting every day, or relieve two stings, every other day? The latter makes more sense, but it is the opposite of the smoothing-out strategy that saving makes possible. Yet it is more reasonable, given that one is dealing with relievers.
What are the policy implications of this analysis? Karelis argued that a
guaranteed income would be counterproductive for people who are not poor, as it would undermine work motivation. However, a negative income tax, guaranteeing income up to the poverty line, would actually increase the incentives for a poor person to get out of poverty.
It would supply the reliever goods up to the point where the additional unit of income is worth more, and so, in pursuing it, one is stepping out of poverty, not remaining stuck in it. The poor are just like everyone else, except that they have less money. Once policymakers begin to understand this, we may begin to shift from our current counterproductive policies of punishing the poor and blaming them for their condition, to an effective strategy that will get people out of poverty.
Michael W. Howard is Professor of Philosophy at the University of Maine, coordinator of the U.S. Basic Income Guarantee Network, and co-editor, with Karl Widerquist, of two books: Alaska’s Permanent Fund Dividend and Exporting the Alaska Model.
Amazing that we’ve spent trillions funding the war on poverty and we had the strategy wrong all along. Reading the letter from Mr. Howard just reinforces the picture of the liberal elite sitting their ivory tower pontificating solutions without any real world or off campus experience.
its amazing we have cut taxes for business and the wealthy for years to create jobs and all it has done is screw the middle class— thats actual experience
that made absolutely no sense
No, it makes a lot of sense, at least if you’re a progressive liberal.
What it means is that government should make sure that everyone has just enough income to relieve their pain – for their necessities – but no more because more would lower their motivation to work and, therefore, result in declining marginal utility from those extra dollars. The author of this piece argues that we should stop blaming and punishing the poor, “who are just like everyone else, except that they have less money”, and shift, “to an effective strategy that will get people out of poverty.”
The article doesn’t discuss the implications of the guaranteed income approach, like higher taxes, a lower standard of living for productive citizens, lower GDP, increased government debt, lower motivation for a large segment of the populace, i.e., those who are content with the bare minimum, and so forth. Maybe we’ll get that in future installments about how we can punish and blame our higher income earners.
Between 1979 and 2007, the top 1 percent of Americans with the highest incomes have seen their incomes grow by an average of 275 percent, according to the CBO study (PDF).
In comparison, the 60 percent of Americans in the middle of the income scale saw their incomes increase by just 40 percent during the same time period, according to the study, which was based on a combination of IRS and Census data.
To put the growing disparity of income distribution in a slightly different perspective: Between 2005 and 2007, the top one-fifth of earners in America earned more money than the bottom fourth-fifths.
what it means is, the middle class is getting screwed and the wealthy are getting more tax breaks
I’ll take your word for the numbers, percents, and income growth figures, but I don’t know about tax breaks for the wealthy. What asset levels do you use to define the middle class and the wealthy, and what tax breaks do the wealthy get that others don’t?
I’m not arguing or saying that you’re wrong; I’m just looking for information and the factual basis for your conclusions.
it’s a congressional budget office study and figures
I know. You said that before, but will you please answer the questions that I asked.
Middle, wealthy, etc. are relative. heyrube was specific in which groups were being spoken about: the middle 60%, the top 1%, the top 1/5 and the bottom 4/5.
Congratulations, you get it!
I’m not sure about his conclusions, but this piece has some interesting ideas that I will probably ponder for a few days. Just what I look for in an op-ed article.
None of it matters if the person is too lazy to get off the couch, take a shower and actually apply themselves, SOBER.
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Too many poor want not only the suave, but they want the taxpayer to apply it for them!
Mr. Howard’s economic argument has some merit: ordinary people can be overwhelmed by difficulties and society’s temporarily picking up some of the burden can help them cope. But “The poor are just like everyone else, except that they have less money” is an untested assertion that doesn’t square well with, for instance, the employed middle-class person who becomes poor through gambling or drug abuse. There is an element of self-destructiveness in some – perhaps many – of the poor which purely economic measures won’t touch.
He also fails to analyze the implications of a minimum income on children.
Here’s a bee sting, another US based manufacturer closes up shop here and moves their operation to another 3rd world country. Who feels the sting?
Most of todays poor came from families that once were employed productive families.
I beg to differ. Most of the poor are generational. That’s not to say that there is not a new class of poor, there is. But if the operative word is “most” I would disagree. For 2009 (most recent data I could find) 14.3 % of the population lives below the poverty level. That number has not changed but 1 or 2% off the mean since the late 60’s early 70’s. At the margins of that number there are “new poor” but for ‘most” to be an accurate description the poverty rate would have to be above 28%. I feel sure it isn’t.
bs–Americans were asked how they thought wealth was actually distributed; they estimated that the top 20 percent controlled about 59 percent of the nation’s wealth, while the bottom controlled about three percent. That wasn’t even close: In reality, the top 20 percent controlled about 84 percent of the wealth, while the bottom quintile controlled just 0.1 percent. The combined net worth of the bottom 40 percent, in fact, accounted for just 0.3 percent of the nation’s wealth
It’s not just wealth. In 2007, U.S. income inequality hit its highest mark since just ahead of the Great Depression in 1929. And that was before the current recession brought joblessness and financial peril to scores of Americans, most of whom are on the wrong side
of the wealth divide.
The financial gap has been widening. As economist Joseph Stiglitz , the top one percent of Americans have gone from taking 12 percent of the nation’s wealth 25 years ago to taking nearly a quarter today. Over the past decade, the income of the top one percent has risen 18 percent; the income of Americans in the middle, meanwhile, has fallen.
And consider this: As of 2009, , the net worth of the nation’s 400 wealthiest Americans
was higher than the net worth of the bottom 50 percent of the nation’s households
Your post has nothing to do with the topic Patom1 and I were discussing.
Wealth disparity and poverty statistics are two different things.
and there is no connection, right?
Never the less they are two different things. Patom1 made a statement I felt was incorrect. I was trying to discuss that with her/him.
Wealth (because we live on a planet) is finite. If one person takes half the pie, then all the other dinner guests (employees) are left with only half a pie.
If a person works all their life scraping grease off restaurant floors, is she any less of a human than a person who spends their life creating hedge funds, playing basketball, or running a major bank into the ground? Who actually does more for society, a nurse at a local hospital, or the guy who buys companies and sells the pieces after thinning out the employee base, and breaking the union?
What economic forces drove the shoe making industry out of Maine? Who benefits when we sell our bonds to Chinese businessmen? When wealthy folks start buying up buildings in depressed areas, where do the former tenets go? Is the fifty-something worker at fault when the mill he worked in for 35 years closes? Who hires a man or woman with thirty-five years experience stitching shoes? Are there enough of these “alternative” jobs for all the laid off workers?
Wealth disparity and poverty statistics are related.
Maybe they are related, maybe not. But that is not the topic I was trying to address with patom1.
And I think the author makes an excellent point re: the sting salve. In many instances, doing all the right things, getting a job, being healthy, etc. isn’t enough to get out of poverty. It’s nearly impossible to live, without assistance, on a minimum wage or low wage job, let alone save money.
Seeing hard work not pay off, all the while being told you’re lazy and choosing to be poor? It must be incredibly frustrating.
2010 Census data puts one in three Americans at or near the poverty level. And that is based on an old definition still in use of what the poverty level is and how it is measured, using food purchases. For sure it is a tricky thing to nail down empirically, but on the street, those that are suffering, to a large extent children with 20% of Maine children being challenged when it comes to having adequate nutrition, MOBILITY out of poverty is at its lowest level also… Generational poverty does not equate with “the evil, or deliberately lazy, or purposefully poor.” There are structural reasons for generational poverty as there are for why the middle class is shrinking and the upper class enjoying greater income, wealth, and opportunity consolidation.
I had 2009 data to work with, granted a year can make a difference, particularly a year like 2010. Even then I was using the census data so how they arrived at what they call “poverty level” is up to them.
They do it this way.
The preliminary estimates of the weighted average poverty thresholds for 2011 are calculated by multiplying the 2010 weighted average thresholds by a factor of 1.031565, the ratio of the average annual Consumer Price Index for All Consumers (CPI-U) for 2011 to the average annual CPI-U for 2010. These estimates may differ slightly from the final thresholds that will be published in September 2012 with the release of the official poverty estimates for 2011.
Sounds like a lot of gobblyguck to me but I really don’t think those living in poverty have effectively doubled from 14% of the population to 28% of the population from the final 2009 numbers to 2011.
I generally agree with your statement that there are structural reasons for generational poverty but I’m willing to bet we differ on what they are. Personal experience is a great teacher. I also did not say…Generational poverty does not equate with “the evil, or deliberately lazy, or purposefully poor.”
….
I do not dispute what you are saying.
What a bunch of nonsense! Negative tax to ensure an income up to the poverty line? This will motivate the poor? I think not.
Ever hear of personal responsibility? In this great country, stories are written everyday about people who strive to overcome their economic conditions and achieve their dreams.
We also hear (disgusting) stories like this: a C-store in Peterborough NH recently fired a clerk when a mother complained that her son was refused by said clerk to use a welfare EBT card to purchase beer and cigarettes. Unlike the esoteric examples Howard offers above, this is a real-life example of the poor actually creating more poverty.
Vote Republican. It is our only chance against such dim bulbs.
Speaking of dim bulbs… How many Republicans does it take to change a light bulb? Just one, to give a no bid billion dollar contract to Halliburton to change it for them.
Or, Just one, who needs to change the light bulb when you can get all aglow thinking about Ronald Reagan and Trickle Down economics.
dim bulbs? look in a mirror, laddie
“David Stockman, President Ronald Reagan’s director of the Office of Management and Budget, explained in an op-ed piece, “Four Deformations of the Apocalypse,” exactly how the economic decisions of the GOP over the past 40 years, is destroying not just the economy and capitalism, but the America dream
I saw him on a talking head show about two years ago, and he was spot on…but no one wanted to hear him. No one on either side, esp when you say things like, “We need to cut military spending TODAY…we need to means test Social Security TODAY…we need major tax reform TODAY!”
Vote democratic it’s the only way to prevent the genocide.
What genocide would that be?
Abortion?
Genocide??
typical conservative reaction to education
Education isn’t the problem here. Application of the knowledge in the real world is.
your real world is unregulated business so they can do whatever they like to the environment, labor, etc. your real world is cutting taxes for the wealthy hoping a little might trickle on the middle class, your real world is delusional if you think conservative policies have done anything except make the rich, richer and the middle class poorer.
I just posted a quote from one of the framers of this mess. one of many republicans that say their policies are slanted against the middle class.
“”David Stockman, President Ronald Reagan’s director of the Office of Management and Budget, explained in an op-ed piece, “Four Deformations of the Apocalypse,” exactly how the economic decisions of the GOP over the past 40 years, is destroying not just the economy and capitalism, but the America dream”
guess I ‘ll listen to some of the framers of this mess and some other republicans instead of you economic genuisses
It’s because instead of being respectful and using the truth, it’s must easier to personally attack others. It’s about not wanting to have a discussion, but to instead bully others and try to make them feel stupid for having a different opinion.
That is your tactic.
It’s not. But thank you for another one of those unproductive “I’m rubber and you’re glue” arguments, because along with your attack on this author’s profession, it really highlights what I’ve said.
It is telling that in order to defend your conservative ideals, you
need to attack on the basis of educational attainment. If you need to
make knowledge into a liability, you are probably advancing an argument
that has no merit.
Education isn’t the problem here. Application of the knowledge in the real world is.
I normally don’t count likes… but based on that it seems my sentiment is not uncommon.
Besides it was more of an observation than an attack.
It no longer surprises me that many of our neighbors have bought into the false choice about our education future. They believe we cannot afford what we had. It is untrue and a consequence of money being spent by a radical contingent with a lot of money who want cheap labor more than national excellence.
Attacking knowledge and learning while popular defines ignorance.
Except I didn’t attack. You are just too sensitive.
Perhaps this person has something to say in the classroom lab. It just isn’t a real world solution he’s talking about. Because I believe he really has nothing to add to a problem does not mean I oppose education. That is the definition of hyperbolic.
Btw his viewpoint not mine would be the one considered radical.
Very unfortunate. We’re demonizing knowledge and the pursuit of it now? It’s ridiculous.
There is more than one issue here. When the learned philosophers (above and below) talk about “the poor” they all talk as if there is only one type of “poor” This is false and misleading rhetoric used specifically to push a point of view.
I was briefly financially challenged (I have chosen to never be “poor”) when I first moved out of my mother’s house and began life on my own. I paid the rent, food, light bill, and repaired my own car, and used it only to get to work. (I lucked into a job where the boss paid for gas.)
This is like growing aloe instead of waiting for someone to give you bee-sting salve. I saved what I could, got a second job, and learned that there IS work in Maine if you are willing to really work, and do what needs doing.
Yes there are “generational poor” these are people who may have been taught by someone that life is tough, times are always hard, and the State owes them a living. I choose to believe that these folks are the minority of “poor.”
I believe there is a government interest in keeping some people “poor” If you read about our economic system (capitalism) you will find that this system NEEDS a pool of unemployed workers at all but the critical times (like WW II, and the railroad building era) That means some people will always be out of work.
How we deal with this population will say a great deal about us when others read our history. It is my personal belief that that population (out of fairness) should rotate, and that all workers should either support them, or be them for a year.
One comment. Capitalism may well need a pool of unemployed, as you say, but much of the generational poor/financially challenged are unemployable. Even in the very best of times when Capitalism is out seeking workers 4% of the population still can’t find work commensurate with their skill level. In those times people from other countries flood our borders.
Good points. Most of us are “poor” at some point in our lives. You can either choose to work hard and make smart choices or you can choose to be angry at your lot in life and make bad choices such as drinking/drugs/wasting your money. Nobody owes you anything.
Also, it is important to keep in mind that the so-called “poor” in this country are considered the 1% compared to the rest of the world.
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This is a must read for anyone who has not experienced profound poverty.
That is an interesting statement. May I ask why?
Because if you haven’t experienced it, it is difficult to understand why “these people” can’t just work their way out of it. It would take incredible fortitude and probably some luck to stay a course while climbing your way out of poverty with so much against you.
I think being poor may be more exhausting than working. Imagine the logisitical complexities that exist for extremely poor people. Gathering enough food each day, finding transportation for work, children etc, keeping a safe place to lay your head every night….repeat over and over again.
It is, was, believe me.
That’s why I think this whole thing is an intellectual exercise, nothing more.
It takes a Professor of Philosophy to come up with all that horse manure! Leave it to a PhD to make the simple more complicated than it needs to be!
Some of The Poor seem to have more 4-wheelers and sleds than I do. What am I doing wrong?
The Food Stamp Program, administered by the U.S. Department of Agriculture, is proud to be distributing the greatest amount of free meals and food stamps ever.
Meanwhile, the National Park Service, administered by the U.S. Department of the Interior, asks us “Please Do Not Feed the Animals.” Their stated reason for the policy is because the animals will grow dependent on handouts and will not learn to take care of themselves.
This ends today’s
lesson.
Simplistic slog.
The Department of Interior feeds the animals from Helicopters when food is scarce. If they did not, there would be a mass die-off after a hard winter.
You think children should starve because their parents have no work?
I believe in adult responsibility. I do not believe in starving children to punish lazy adults.
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Thasnks to the News for printing professor Howard’s very informative piece. He exposes some of the built-in fallacies that have always accompanied the suspect field of study called “Economics.” When I was younger, I worked for three years in a local welfare office as a caseworker. I came away with the conclusion that the poor truly are like everyone else . They were as intelligent, responsible, and energetic (some more so) than many of the businessmen, attorneys, and others among my recent friends. Of course, I am basing this on having dealt with poor women because the menfathers would not appear at the welfare office. Only the women/mothers would humble themselves in order to be able to feed, clothe, and house their children. To this day, I detest the spoiled right wingers who make disparaging statements about the poor. ClydeMacDonald, Hampden
The poor are just like everybody else, only a little sooner.
All I see in the comments is the same collectivist thinking born from the left right paradigm. So much energy is wasted arguing about how to fix a broken system that was born and broken from that same paradigm.
99% OWS teaparty doesnt matter its the same crap different toilet. Withdraw yourselves from this system while you have a chance.