4 ms·

Romanticizing the Poor

10 points by jfornear 17y ago

patio11 17y ago
Speaking of sin taxes in developing economies: last I heard about 10% of the revenues of Chinese governments below the national level is the sin tax on cigarettes. I'm opposed to sin taxes for prudential grounds: there is absolutely no reason why the government should try to trick poorly educated poor people out of their honestly earned wages, and yet every US state with a lottery spends eight to nine figures a year on advertising designed to do exactly that! Ditto for governments which promote vice as an economically lucrative sideline.
- nazgulnarsil 17y ago
  I'm a libertarian, so I have systemic/ideological objections to taxes in general, but from a pragmatic point of view: taxes on voluntarily consumed luxuries are better than involuntary taxes. especially if the consumers of those luxuries are imposing negative externalities via scialized medicine.
  - patio11 17y ago
    I sympathize, but as a libertarian, you probably shouldn't need too much convincing that the state is going to act in the interest of its revenue streams against the interest of its citizens. For example, the state will tax tobacco on the one hand and massively subsidize it on the other. They'll declare gambling illegal so that if you want to gamble you'll "voluntarily" pay the hidden tax on lotteries (lotteries are essentially taxed at 50% relative to typical games in the casino, with the tax being terrible, terrible odds for players which are protected from market pressure by being a legally enforced monopoly on sin). In many places in the US the government literally is the one distributing the alcohol.
    - nazgulnarsil 17y ago
      lotteries aren't gambling. you will always lose for absolutely any reasonable definition of the word always.
petercooper 17y ago
I feel that this piece plays with contradicting ideologies. It pushes a left-wing agenda of "more government" as a way of protecting "vulnerable" poor people (who are made out to be stupid enough to need protecting by "corporations, governments, and nonprofits") while suggesting a comparatively right-wing solution: Rather than viewing the poor primarily as consumers, people interested in economic development should approach the poor as producers. The best way to alleviate poverty is to raise the real income of the poor by creating opportunities for steady employment at reasonable wages. Great idea, and corporations have done this for years. But who defines "reasonable wages?" Leftist policies on workplace regulations (including minimum wages and time limits) make it harder to employ "poor people." (Note: I'm only using this article's terminology for simplicity. "poor" is a silly term, IMHO.) If you can employ a qualified, capable worker for minimum wage (and right now, this is easy), why would you employ someone who is "poor"? If the "poor" worker is as ill-equipped as this article suggests, he is likely to be less productive - yet if you can't pay under the minimum wage, you may as well not hire him. If you do hire him, if he is so stupid, you are more likely to need to fire him - resulting in higher costs, potential increases in unemployment insurance, and more. Since leftist regulations (which I am partially in support of) have caused "poor" people to be too expensive to employ, corporations instead outsource a lot of labor intensive tasks to countries where it's cheap enough for outsource companies to hire the really poor (with the lack of workplace protections and regulations to boot). This leaves our poor even poorer, all for want of getting rid of a few regulations.
- nazgulnarsil 17y ago
  good rule of thumb is that you can ignore anyone who espouses any variant of "just-prices". these people don't understand basic economics.
- rue 17y ago
  I do not think the poor are made out to be stupid in the article, moreso it perhaps contains in it the American poverty experience: among Western countries, poverty in the U.S. is quite unique particularly in the form of long-term predation and lack of any social support structures. Poverty in the UK is not necessarily any less entrenched, but it is still a different beast. > If you can employ a qualified, capable worker for minimum wage (and right now, this is easy), why would you employ someone who is "poor"? Indeed, I do not think "reasonable wages" necessarily translates to "minimum wage" which - in the U.S. and many other places - is not actually sufficient. But that statement was specifically counterpoint to the recently fashionable (and in some ways very good) microfinancing movement and other forms of entrepreneurship. To nevertheless answer the question to convince someone espousing a liberal[1] perspective: because it creates more consumers for your products. A minimum wage job does not as a rule require highly skilled employees so that a newcomer can generally become proficient within 6 months, usually less. [1] In the sense of the actual meaning of the word.
Mz 17y ago
More generally, poor people “could easily save more without getting less nutrition by spending less on alcohol, tobacco, and food items such as sugar, spice, and tea,” Banerjee and Duflo conclude. For example, the typical poor household in Udaipur could spend up to 30 percent more on food if it did not spend money on alcohol, tobacco, and festivals. Consuming alcohol and tobacco not only takes money away from a family’s nutrition, but also sets off a cascade of other problems that poor people more frequently encounter. Alcohol abuse, for instance, reduces work performance while increasing accidents, domestic violence, and illness. Because many indigent people earn their livelihoods through physical labor, falling ill means not earning money. A small problem with their theory: Every last item they list has medicinal purposes. It's possible (and in my opinion very likely) that alcohol, tobacco, spices and tea are being used by "the poor" to self-medicate. For example, alcohol kills germs and poor people often live in filth. How do we know that their situation wouldn't be worse without it? If you want them to stop drinking, you would need to resolve the underlying reasons motivating them to drink -- which may well be rooted in "poverty" but it isn't necessarily rooted in lack of money per se. Financial problems grow out of real problems. Resolve the underlying real problems and the financial problems tend to clear up on their own, or at least improve. Articles like this focus too much on money per se and too little on the real problems -- the problems which would still be harming these people and lowering their quality of life even if we lived in a Star Trek universe where money no longer existed.
- roundsquare 17y ago
  Its true that we should look into the root causes of each of these so called "sins" but I don't think what you are saying is particularly likely. I'll search around for studies, but I would bet its far more likely that these goods are being consumed to take the edge off life (as this article suggests). Indeed, a recent field study in Sri Lanka reveals that more than 10 percent of poor male respondents regularly spend their entire incomes on alcohol. Certainly the medicinal argument can't be made here. Even though alcohol kills germs, consuming it in large amounts produce a net harm on your health. If 10% of males are spending their entire income on alcohol, then its likely that a large portion of them are spending a large portion of their income on alcohol, so much that they are doing more harm to their bodies than good. In addition, the fact that they spend money on festivals argues that they are doing things to take the edge off life and not doing this for medicinal purposes. In part, I imagine this article is a reaction to a lot of people discussing how innovative the poor are and saying "if we could just give them a chance, they'll pull themselves out of poverty." This, really, is the basis of the microfinance industry. To some degree, its true. Poor villagers in India often are often engaged in a large number of (informal) financial transaction at any time. They have various loans with various money lenders, things they borrowed from neighbors, self help groups, etc... all of which they keep track of without a pen and paper (much less a computer). In addition, there are many instances of well-intentioned people getting things wrong. (One example is that many MFIs required that their loans be used on profit-making activities, and not refinancing loans to money lenders. This is foolish because the loans to money lenders are often at a higher rate and just refinancing that loan would help them immensely as well as almost guaranteeing the repayment of the micro loan). However, its not clear to me that this translates to the ability to quickly jump into the formal economy without protection. This projection is necessary and thats what the article is arguing for. In the end though, I do agree with something you are saying. Its critical that the entire problem be approached, not just the lack of money. This approach is hard to sell because it is slower and doesn't produce a magic bullet/catch phrase to sell, but its probably the only way to make a proper dent in the problem. This is why government intervention is critical. Even if this is a profitable exercise, it would be a very long term investment with uncertain returns, something that a profit driven enterprise is unlikely to take on and something that NGOs aren't big or coordinated enough to solve[1]. [1] Since this website attracts a lot of entrepreneurs, I suggest that there is a startup idea hidden here. I don't know how this would work, but if anyone has ideas, I say we discuss them.

10 points by jfornear 17y ago

Speaking of sin taxes in developing economies: last I heard about 10% of the revenues of Chinese governments below the national level is the sin tax on cigarettes. I'm opposed to sin taxes for prudential grounds: there is absolutely no reason why the government should try to trick poorly educated poor people out of their honestly earned wages, and yet every US state with a lottery spends eight to nine figures a year on advertising designed to do exactly that! Ditto for governments which promote vice as an economically lucrative sideline.

nazgulnarsil 17y ago
I'm a libertarian, so I have systemic/ideological objections to taxes in general, but from a pragmatic point of view: taxes on voluntarily consumed luxuries are better than involuntary taxes. especially if the consumers of those luxuries are imposing negative externalities via scialized medicine.
- patio11 17y ago
  I sympathize, but as a libertarian, you probably shouldn't need too much convincing that the state is going to act in the interest of its revenue streams against the interest of its citizens. For example, the state will tax tobacco on the one hand and massively subsidize it on the other. They'll declare gambling illegal so that if you want to gamble you'll "voluntarily" pay the hidden tax on lotteries (lotteries are essentially taxed at 50% relative to typical games in the casino, with the tax being terrible, terrible odds for players which are protected from market pressure by being a legally enforced monopoly on sin). In many places in the US the government literally is the one distributing the alcohol.
  - nazgulnarsil 17y ago
    lotteries aren't gambling. you will always lose for absolutely any reasonable definition of the word always.

petercooper 17y ago

I feel that this piece plays with contradicting ideologies. It pushes a left-wing agenda of "more government" as a way of protecting "vulnerable" poor people (who are made out to be stupid enough to need protecting by "corporations, governments, and nonprofits") while suggesting a comparatively right-wing solution: Rather than viewing the poor primarily as consumers, people interested in economic development should approach the poor as producers. The best way to alleviate poverty is to raise the real income of the poor by creating opportunities for steady employment at reasonable wages. Great idea, and corporations have done this for years. But who defines "reasonable wages?" Leftist policies on workplace regulations (including minimum wages and time limits) make it harder to employ "poor people." (Note: I'm only using this article's terminology for simplicity. "poor" is a silly term, IMHO.) If you can employ a qualified, capable worker for minimum wage (and right now, this is easy), why would you employ someone who is "poor"? If the "poor" worker is as ill-equipped as this article suggests, he is likely to be less productive - yet if you can't pay under the minimum wage, you may as well not hire him. If you do hire him, if he is so stupid, you are more likely to need to fire him - resulting in higher costs, potential increases in unemployment insurance, and more. Since leftist regulations (which I am partially in support of) have caused "poor" people to be too expensive to employ, corporations instead outsource a lot of labor intensive tasks to countries where it's cheap enough for outsource companies to hire the really poor (with the lack of workplace protections and regulations to boot). This leaves our poor even poorer, all for want of getting rid of a few regulations.

nazgulnarsil 17y ago
good rule of thumb is that you can ignore anyone who espouses any variant of "just-prices". these people don't understand basic economics.
rue 17y ago
I do not think the poor are made out to be stupid in the article, moreso it perhaps contains in it the American poverty experience: among Western countries, poverty in the U.S. is quite unique particularly in the form of long-term predation and lack of any social support structures. Poverty in the UK is not necessarily any less entrenched, but it is still a different beast. > If you can employ a qualified, capable worker for minimum wage (and right now, this is easy), why would you employ someone who is "poor"? Indeed, I do not think "reasonable wages" necessarily translates to "minimum wage" which - in the U.S. and many other places - is not actually sufficient. But that statement was specifically counterpoint to the recently fashionable (and in some ways very good) microfinancing movement and other forms of entrepreneurship. To nevertheless answer the question to convince someone espousing a liberal[1] perspective: because it creates more consumers for your products. A minimum wage job does not as a rule require highly skilled employees so that a newcomer can generally become proficient within 6 months, usually less. [1] In the sense of the actual meaning of the word.

Mz 17y ago

More generally, poor people “could easily save more without getting less nutrition by spending less on alcohol, tobacco, and food items such as sugar, spice, and tea,” Banerjee and Duflo conclude. For example, the typical poor household in Udaipur could spend up to 30 percent more on food if it did not spend money on alcohol, tobacco, and festivals. Consuming alcohol and tobacco not only takes money away from a family’s nutrition, but also sets off a cascade of other problems that poor people more frequently encounter. Alcohol abuse, for instance, reduces work performance while increasing accidents, domestic violence, and illness. Because many indigent people earn their livelihoods through physical labor, falling ill means not earning money. A small problem with their theory: Every last item they list has medicinal purposes. It's possible (and in my opinion very likely) that alcohol, tobacco, spices and tea are being used by "the poor" to self-medicate. For example, alcohol kills germs and poor people often live in filth. How do we know that their situation wouldn't be worse without it? If you want them to stop drinking, you would need to resolve the underlying reasons motivating them to drink -- which may well be rooted in "poverty" but it isn't necessarily rooted in lack of money per se. Financial problems grow out of real problems. Resolve the underlying real problems and the financial problems tend to clear up on their own, or at least improve. Articles like this focus too much on money per se and too little on the real problems -- the problems which would still be harming these people and lowering their quality of life even if we lived in a Star Trek universe where money no longer existed.

roundsquare 17y ago
Its true that we should look into the root causes of each of these so called "sins" but I don't think what you are saying is particularly likely. I'll search around for studies, but I would bet its far more likely that these goods are being consumed to take the edge off life (as this article suggests). Indeed, a recent field study in Sri Lanka reveals that more than 10 percent of poor male respondents regularly spend their entire incomes on alcohol. Certainly the medicinal argument can't be made here. Even though alcohol kills germs, consuming it in large amounts produce a net harm on your health. If 10% of males are spending their entire income on alcohol, then its likely that a large portion of them are spending a large portion of their income on alcohol, so much that they are doing more harm to their bodies than good. In addition, the fact that they spend money on festivals argues that they are doing things to take the edge off life and not doing this for medicinal purposes. In part, I imagine this article is a reaction to a lot of people discussing how innovative the poor are and saying "if we could just give them a chance, they'll pull themselves out of poverty." This, really, is the basis of the microfinance industry. To some degree, its true. Poor villagers in India often are often engaged in a large number of (informal) financial transaction at any time. They have various loans with various money lenders, things they borrowed from neighbors, self help groups, etc... all of which they keep track of without a pen and paper (much less a computer). In addition, there are many instances of well-intentioned people getting things wrong. (One example is that many MFIs required that their loans be used on profit-making activities, and not refinancing loans to money lenders. This is foolish because the loans to money lenders are often at a higher rate and just refinancing that loan would help them immensely as well as almost guaranteeing the repayment of the micro loan). However, its not clear to me that this translates to the ability to quickly jump into the formal economy without protection. This projection is necessary and thats what the article is arguing for. In the end though, I do agree with something you are saying. Its critical that the entire problem be approached, not just the lack of money. This approach is hard to sell because it is slower and doesn't produce a magic bullet/catch phrase to sell, but its probably the only way to make a proper dent in the problem. This is why government intervention is critical. Even if this is a profitable exercise, it would be a very long term investment with uncertain returns, something that a profit driven enterprise is unlikely to take on and something that NGOs aren't big or coordinated enough to solve[1]. [1] Since this website attracts a lot of entrepreneurs, I suggest that there is a startup idea hidden here. I don't know how this would work, but if anyone has ideas, I say we discuss them.