19 ms·

Why Do People Stay Poor? [pdf]

169 points by zackhsi 6y ago

aspenmayer 6y ago
> Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated at baseline and that the gains arising from eliminating misallocation would far exceed the costs. Our findings imply that large one-off transfers that enable people to take on more productive occupations can help alleviate persistent poverty. Balboni, C, Bandiera, O, Burgess, R, Ghatak, M and Heil, A. 2020. 'Why do people stay poor?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14534 https://cepr.org/active/publications/discussion_papers/dp.ph...
pmiller2 6y ago
Off topic, but I would recognize \documentclass{article} anywhere.
bschne 6y ago
To anyone interested in the topic, I recommend reading Duflo & Banerjee's 2011 book "Poor Economics". They pioneered the approach of using RCTs to test interventions in fighting poverty (for which they received the Nobel Memorial Prize together with Michael Kremer). They go into a lot of factors as to why poor people get certain economic outcomes, including but not limited to the poverty trap theory, and take a refreshingly "humane" / respectful view towards the people they are dealing with.
- simulo 6y ago
  I second that. The RCTs get discussed most often. But what was eye-opening for me were their observations on how poor people manage the few resources they have matching the infrastructure they can access – like investing in bricks (Ch8)
emsign 6y ago
My hot guess: because of capitalism. It needs the exploitation of the weak.
- KorematsuFred 6y ago
  It is out of academic fashion these days to blame Capitalism in papers directly. It is often arrived at very indirectly.
- chrisco255 6y ago
  Poverty is the base case. It's the default state. How does prosperity increase at all?
  - claudiawerner 6y ago
    There are a number of interesting responses to the idea that poverty is the base case or default in some way here: https://www.reddit.com/r/samharris/comments/f12rl0/poverty_is_the_default_state_of_humankind/ https://www.reddit.com/r/samharris/comments/f12rl0/poverty_i... What do we mean by default? Would we say that the default state of a child is surviving without their mother? Is a lack of breast milk or shelter the default? I can easily imagine a situation (I.e. a functioning society) in which poverty is not the default. If poverty is defined to mean having below a certain daily wage[0], then how is that "default"? Do we mean absolute or relative poverty? Just like default settings in your favourite program presuppose the program itself, it seems poverty presupposes a system where some people make above $<poverty threshold> a day and some do not. To say that poverty is the 'default' without also specifying to whom and in which society it is the default is either useless information, or an apparently irrelevant claim that only concerns some cases in the early stages of human pre-civilization. [0] Beware that if you disagree with this supposition, you lose the ability to claim that statistics which use increase in daily wage indicate moving out of poverty. The case for saying that capitalism does away with poverty depends on this definition of poverty.
    - luckylion 6y ago
      > I can easily imagine a situation (I.e. a functioning society) in which poverty is not the default. You're imagining a society that has overcome the default state and maintains their progress. They haven't changed the default. A machine's default state isn't being powered, but if you power up a machine and keep feeding it power and maintain it well, you can rely on it being powered. Once you stop maintaining it, or stop providing power, it will go back to the default state of not being powered. > Do we mean absolute or relative poverty? Absolute if you want to get anywhere. Unless you distribute everything perfectly equal, you'll always have one half that makes less than the median.
roenxi 6y ago
I'm not going to comment about the article without reading it carefully; but just in case there are any aspiring data analysts online there is a chart that is interesting even without knowing anything about the data... On page 64 (65 as the PDF numbers it), chart (b) "Distribution of savings rate" has an awkward little peak on the left hand side of the chart. It is very difficult to tell from inspection whether that is a real feature of the underlying data or if it is an artefact naive kernel density estimation. If you ever see that pattern in your graphs, do consider trying logKDE [0] rather than ordinary Kernel Density Estimation a la geom_density() in ggplot. It also isn't perfect but the result is usually a bit better for things that approximate an exponential distribution. [0] https://cran.r-project.org/web/packages/logKDE/vignettes/logKDE.pdf https://cran.r-project.org/web/packages/logKDE/vignettes/log...
- JamesBarney 6y ago
  I think that's a real effect. Intuitively I would imagine a lot more people save 0% (or close to 0%) of their income than save 50% of their income, I would also expect a lot more people to save or overspend 3% of their income than overspend or save 25% of their income.
Toine 6y ago
TLDR; "We have shown that poverty traps exist. People are poor because of a lack of opportunity. It is not their intrinsic characteristics that trap people in poverty but rather their circumstances. Poverty is not an innate condition. This has implications for how we think of development policy and for the value of eliminating global poverty."
- lazyjones 6y ago
  Based on data from the Third World and destined to be used to argue for policy changes (towards wealth redistribution) in the First World.
  - jyounker 6y ago
    This is anecdotal, but having grown up poor, I can tell you that the research is perfectly applicable in the first world.
    - lazyjones 6y ago
      And I grew up poor and can tell you it's not. In the First World, you have other opportunities to earn wealth than having more than enough livestock. Go to school, study something worthwhile, start a company and prosper.
- domnomnom 6y ago
  That sort of epistemological tone is quite painful to see.
jcun4128 6y ago
Without making the jump from washing plates/factory work to software I don't know how I would have escaped(still haven't) considering my pay increased 4 times. Just brutal when you trade hours for money directly at a low rate, I was doing 70hrs washing plates before and it was nothing ha. Edit: there is the thought of living within your means, personally with a roommate I could live on $10-$20K a year which you can make doing labor jobs but not a lot saving. I'm lucky being single/having no direct responsibility eg. children. It is my opinion though that if you want to/have internet/time then you can alter your life for the better, but yeah can't just say "learn to code". But other options available. I see the point about opportunity because I had a friend to crash on his couch when I was technically homeless that is helpful/bare min opportunity. My jump was not fast, it took at least 2 years not including the 3 years before that of self-study/personal interest. I freelanced on the side while working as a dishwasher before first in office/full time job.
- adventured 6y ago
  What language/s did you teach yourself during that several year learning time? What did you choose to focus on? (I noticed this: ReactJS/Node-Express/MySQL/Python in your profile, but I'm not sure if that's what you started with)
  - MaximumYComb 6y ago
    His stack indicates web dev, which is the typical path for self taught programmers. Plenty of work available that pays more than minimum wage.
    - jcun4128 6y ago
      Yeah I have not really gone down into the C/C++ that level and I haven't touched the Microsoft side eg. .NET Closest thing for "native" is using the wrappers for JS which for my needs works. I did have to force myself to figure out how to get a basic Android widget (Java) to work that was tough.
  - jcun4128 6y ago
oblio 6y ago
I'll probably read the whole thing at some point, but I'd say that it's due to the https://en.wikipedia.org/wiki/Mediocrity_principle https://en.wikipedia.org/wiki/Mediocrity_principle, basically "don't assume you're special". Or "don't assume any one sample of a thing is special", from the start. And since the natural state of humanity is poverty (after all we all started as hunter-gatherers), breaking out of it on your own is extraordinary. I wouldn't be surprised that the first communities to break out of poverty had 1 extraordinary individual that lifted their entire family/clan/tribe. Then through social osmosis more people in their vicinity were lifted, provided they cooperated/were open enough to the new thing that made their neighbors rich/were not discriminated for a million reasons/...). Look at the Industrial Revolution. It basically spread geographically from the UK and is also spread socially to UK off-shoots, first.
- truckerbill 6y ago
  That specific principle you linked to seems to be saying something different to your hypothesis - it’s arguing the idea that a sample of one doesn’t let you assume something is unique.
  - oblio 6y ago
    If you extrapolate it a bit, it does say what I'm saying. I am a sample of one, too. You too, are a sample of one :-) Why would I be special? Why would you be special? We all tend to think we're amazing (and our families/clans/tribes/cities/countries), in many cases with very flimsy reasoning. I'll rephrase my comment.
    - truckerbill 6y ago
      Ah, makes more sense when you put it that way!
- La1n 6y ago
  >And since the natural state of humanity is poverty (after all we all started as hunter-gatherers), breaking out of it on your own is extraordinary. The natural state was sharing resources and taking care of a small group of people. Not working for a boss.
mNovak 6y ago
>> The threshold above which people no longer regress into poverty is 9,309 BDT (504 USD PPP) Am I understanding PPP correctly--this is a value equivalent to what $500 buys in the US? That's surprising because the paper states this is above the amount available for conventional microfinance; I didn't realize it was indeed that "micro".
- accurrent 6y ago
  Yes. You'll be surprised by how much $100 can get you in a developing country and how few people actually have access to even that amount of money.
  - La1n 6y ago
    But that doesn't matter here, read the previous comment again >this is a value equivalent to what $500 buys in the US?
feralimal 6y ago
For the individual, the answer is Debt. And servicing repayments of debt. Eg, that on the typical mortgage you repay ~3 times what you borrowed.
- nicbou 6y ago
  3 times? How so?
  - feralimal 6y ago
    Sorry - my mistake. I was going off memory. 2 times, including the principle. Looking here: https://finance.icalculator.info/mortgage-calculator.html https://finance.icalculator.info/mortgage-calculator.html I enter, Mortgage Amount: 100000 Annual Interest Rate: 5% Term of Mortgage: 30years The interest paid is 93255.20
    - blaser-waffle 6y ago
      That's also a 30-year mortgage, paid off at the lowest rate possible, with no refinancing. And also leaves out that the rate of inflation over 30 years means your monthly cost decreases; hopefully you're getting inflation adjustments to your salary...
    - benibela 6y ago
      But that is still cheaper than paying rent for 30 years
      - bbeekley 6y ago
        I semi-regularly plug numbers into this Buy v Rent calculator by NYT [1]. They're pretty equivalent in the 10-30 year range and match housing prices I've seen. It's hard to beat the SP500's >8% average return [2]. [1] (paywalled) https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... [2] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
globular-toast 6y ago
This seems to be "Why do people stay in poverty?" "Poor" has a different meaning depending on who you ask. For example, students are popularly considered "poor". Some people would consider themselves "poor" if they can't afford a car. Some people consider themselves "poor" because they are not millionaires.
- woodandsteel 6y ago
  I have not read the article, but assume that their use of the term "poor" was carefully defined.
  - globular-toast 6y ago
    Yeah but my comment was more about the fact people here are talking about mortgages and things. Not really the same kind of poor.
    - woodandsteel 6y ago
      Oh, ok.
TrackerFF 6y ago
This is something I enjoy about our jobs up in Scandinavia - the salaries are very compressed around the mean. Engineers, Lawyers, and other similar professions tend to earn 2x-3x of what the absolute minimum wage jobs earn. That's quite the difference compared to other countries, where Engineers can earn 5x-20x. People here are still motivated to seek higher education and better paid jobs, even though they could live normal lives off those lowest paid jobs that don't require any education.
- Kiro 6y ago
  I agree but considering the minimum wage is 0 I don't understand how you came up with the 2x-3x number.
  - djrobstep 6y ago
    Nordic countries have minimum wages defined by collective bargaining agreements rather than the law - because unionization is so strong and the agreed minimums are relatively good, they don't really need national legal ones.
    - Kiro 6y ago
      Yes, but it's still optional. Only 39% of small companies have signed a collective agreement in Sweden. Companies refusing unionization and paying way below the union rates is a real problem: https://www.breakit.se/artikel/7599/i-spent-two-weeks-delivering-for-uber-eats-and-made-4-4-per-hour https://www.breakit.se/artikel/7599/i-spent-two-weeks-delive... Even most people in Sweden think there is a legal minimum wage and are surprised to hear it's 0 and that you can legally pay someone 0.01 an hour.
  - TrackerFF 6y ago
    Yes, we - at least in Norway - don't have any official minimum wage, but a good rule of thumb is that the majority of unskilles non-industrial jobs start around 150 NOK / hr. +/- 15 NOK. Or annually around 275k-345k NOK In USD, that around $16.5 +/- $1.5. $30k - $39k year. The vast majority of professional jobs which require a BS or MS start between 450k-600k / $50k-$67k, and will by end of career be around 600k - 1MM / $50k - $110k. But keep in mind, there are several factors at play: - private pays more that public jobs - industry salaries differs wildly - location plays a big role - lots of outlier jobs pay much more than the above - The numbers above are based on current USD/NOK rates, which is very weak for us Norwegians. It's right now around 9, but has been down around 5 during the good years. So one needs to look at salaries as a relative thing. Edit: But we DO have union wages, which effectively work as minimum wages for many professions. But alas, there are lots of jobs with no unions.
hprotagonist 6y ago
The reason that the rich were so rich, Vimes thought, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and _would still have wet feet_." This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
- AaronLasseigne 6y ago
  Yup, being poor is expensive.
- refurb 6y ago
  I'm not trying to generalize, because I know poor people who are poor through no fault of their own (and we should provide public support for them), but I also know a larger number of people who contributed to their own dire financial situation and it wasn't because they couldn't afford quality boots, it was because they over-extended themselves with new cars, a way too big house, the big screen TVs and expensive trips and meals.
  - grugagag 6y ago
    Let me guess, credit card debt. I would take into consideration also the trap that creditcard companies set for unsuspecting folk, who make the mistakes themselves, is true ,but who were set up into a trap way before spending any penny.
  - benlivengood 6y ago
    And bankruptcy fixes things for the latter folks because they have a good, stable income.
nimbius 6y ago
A sterling argument could be made that Capitalism as a concept requires a permanent underclass of low income workers. for example, Guardiola-Rivera believes that poverty and inequality are political issues that can only be solved when the poor organise and come up with a solution to liberate themselves. Rising income inequality is breeding more inequality in educational opportunity, which results in greater inequality in educational attainment. That, in turn, undermines the intergenerational mobility upon which Americans have always prided themselves and perpetuates income inequality from generation to generation. This dynamic all but guarantees a permanent underclass.
rayiner 6y ago
This is why Booker/West-style baby bonds could have a significant chance to alleviate structural poverty. Beyond a certain threshold (and I think we’re past that in the US) equality of opportunity (better education, etc.) won’t make up for starting out poor. What people need is seed capital. For a fraction of the cost of universal healthcare, we could endow each child born in the US with a $250,000 trust fund at birth. That would be game changing.
- jeffbee 6y ago
  What would be the point of such trust funds? Assuming they were not intended to pay out until higher education (age 18?) it would just look exactly like Social Security: a supposedly-funded massive future liability that the federal budget borrows against and/or repeatedly attempts to privatize. Except your idea would receive even higher contributions than Social Security does.
  - rayiner 6y ago
    Are you asking what people would be able to use $250k for?
    - jeffbee 6y ago
      No, I'm asking why it would be structured like that. It seems like an open invitation to just raid and squander it. If you took the same amount of money you could, just as an example, permanently endow a professional educator for every 20 births, which begins paying off right away, instead of decades later.
      - rayiner 6y ago
        I think spending the money on a “professional educator” would be squandering it. This country has huge inequities, and I don’t think you can solve it by throwing money at college educated (disproportionately white) people.
        6y ago
drbojingle 6y ago
off the top of my head I think it depends on the type of poor you are. Some people are poor because of their situation and some situations are more difficult to escape than others. Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor.
- woodandsteel 6y ago
  >Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor. That's true. But often the reason they have those bad habits is they were taught them by the environment that, through no choice of their own, they were born in.
  - quickthrowman 6y ago
    Absolutely. It’s not only bad habits they were taught, but the huge amount of things they weren’t taught. I was taught how to budget, how compound interest works, and so on by family members. I used to do rental property maintenance in places where people didn’t know to use a dish strainer to prevent sink clogs, nobody ever taught them. Now, spread that out over hundreds or thousands of other things they’re not aware of. There’s tons of useful knowledge that middle/upper class people pass down t their kids that poor people have no clue about.
    - mythrwy 6y ago
      Agreed. And knowing is not enough, you have to have enough discipline or environmental training to act at the appropriate junctures.
  - drbojingle 6y ago
    Sure, but you can learn bad habits regardless of the environment you were born into and you can fix those habits too, if you're so inclined to reflect and practice. This is very different than having your father die while you're young and promising to be the woman of the house and take care of your sick mom and baby sister.
theodric 6y ago
I also know some people who have a poor mentality. That is, they consistently refuse to seek out better-paying opportunities despite abundant mental ability in the name of "happiness," complain that their series of low-paying roles deserve more money, and advocate for hard socialism to enable redistribution to make that possible. The problem, you see, is all the other people.
- kergonath 6y ago
  Them, and those straw men.
centimeter 6y ago
Wealth is mean-reverting along genetic lines. I.e if your removed ancestors were poor, but your immediate ancestors were rich, chances are you or your descendants will revert to being poor. Together with available data conditioned on factors like geography and ethnic background, by far the most likely hypothesis is that expected wealth is mediated by factors like intelligence and time preference, which are strongly genetically heritable.
frank_bb 6y ago
Simply, because of banksters, rotten owners of manipulated 'financial system' - the rothschilds & their bitch€s, institutions, and so on. Killuminati. That system is very easy to manipulate (for them, not for us)... They've created the most powerful currency ever. No, not USD, but the DEBT. With this, they can do everything today, as they owe also governments and the rest. They can create 'crisis' just like that, usually to rob working people of valuable assets (that comes from real work, not from usury), to cover their worthless (melting since '71) "money". And tell the people that's their fault. Again and again. Decade by decade. The sad thing is that so many people still believes in that whole rotten, satanic system; only some people have their minds open enough to understand this, to know that's our sad reality (it's not about what we believe in, but what we SEE); the others are blind, 'too busy' or 'too lazy' even to think, so it's easier to call it 'conspiracy, theories, etc'. Today, if mainstream fng media call something as 'conspiracy', you should think about that twice and analyze why. Same about pseudo "law", that concerns us, but doesn't apply to them... Which promotes deviation, but banishes almost everything that is actually good for us. That why people do stay poor - because of corrupt puppet governments owned by these 'elites'... The humanity should have much bigger, much better, beautiful achievements so far! But that's impossible in this system, which makes the people focusing mainly on bullshit, instead of things, that really matters! What people can do? Well, nothing special, just WAKE UP and start to think! The more the better. This is what the system fears: awake, thinking people. People who have the potential to be free... The system needs slaves! That's why the world looks what it looks like, that's why people suffer - needlessly! Thank you & good luck (we all need it).
paulpauper 6y ago
Why does every econ paper these days read like a high-energy physics paper? I feel like I am reading about field theory, not econ.
- marcosdumay 6y ago
  Hum... What exactly did you expect? It has a simple stochastic model and some statistics for verifying if the real world agrees with it. You are deluding yourself if you think one can study economics without advanced statistics.
  - paulpauper 6y ago
    so how does one account for early economics writing being light on math. Were economists Adam Smith, Hayek, and Ricardo deluded because they did not know advanced stats?
    - marcosdumay 6y ago
      Up to a point, yes. They did get many conclusions that are easily disproved today.
  - JamesBarney 6y ago
    Are these study's preregistered? It seems like there is so many degrees of freedom the researcher could easily take a stroll through the garden of forking paths.
    - marcosdumay 6y ago
      > Are these study's preregistered? No idea. I like this study, it doesn't have as many degrees of freedom as is usual, the theory is kept to a minimum, and the data is kept to the maximum available. But you are right, there is still a lot to go wrong. Anyway, I haven't seen many empiric studies of poverty traps. The real test is, given many of those if they will agree with the theory, not what any single one says.
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perfmode 6y ago
does anyone read Piketty?
- deleted 6y ago
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ghufran_syed 6y ago
I’m not qualified to judge the technical merits of the paper, but their conclusion seems plausible. They concluded that in an illiterate rural population, there did seem to be a threshold effect in asset levels above which it seemed much easier to progress economically. But it’s unclear to me how applicable this is to the poor in the US or other developed economies, particularly when we’re talking about a population where almost everyone can read and write, and many of them have cellphones and internet access. Part of the reason that many people (including my family) try to emigrate from developing countries to more developed economies is that the same person, with the same skills, can be vastly more productive in those economies, which is what allows that person to have a much better lifestyle. And much of the reason that high-productivity jobs are not available in those poor countries is because of a lack of capital. So it makes sense that giving the poor some minimal amount of capital is required, so that those same people can be more productive. But it seems unlikely to me that adding capital (increasing the assets of poor people) would have the same beneficial effect in developed economies, given the large pre-existing ‘capital stock’ This [article](https://www.forbes.com/sites/timworstall/2014/08/27/by-global-standards-there-are-no-american-poor-all-in-the-us-are-middle-class-or-better/#1c00d8035cb5 https://www.forbes.com/sites/timworstall/2014/08/27/by-globa...) describes what american poverty levels would be if we used the same measure as we do in developing countries and makes the point that by those measures there are no poor people in the US, just “lower middle class”. That doesn’t mean we shouldn’t try and improve the lives of people at the lower end of the income distribution, but we should at least understand that when we use the term poverty in developing and developed economies, we’re talking about something qualitatively and quantitatively different - so the optimal solutions are likely different too.
- badRNG 6y ago
  > by those measures there are no poor people in the US That doesn't feel like a meaningful metric when there are as many as 17% of mothers with young children experiencing food insecurity [1]. Perhaps that's due to COVID, but 11% of households were food insecure as recently as 2018 [2]. Around half a million Americans are homeless, and 35% of them are shelterless [3]. Are all of these people "not poor" and are they "middle class"? This all to say that how we think about poverty should focus more on the outcomes that people actually experience (access to food, shelter, healthcare, etc) than key economic indicators. Claims like "the War on Poverty is over" and "there are no poor people in the US" don't seem to match up with the lived experiences of many Americans. [1] https://www.brookings.edu/blog/up-front/2020/05/06/the-covid-19-crisis-has-already-left-too-many-children-hungry-in-america/ https://www.brookings.edu/blog/up-front/2020/05/06/the-covid... [2] https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/key-statistics-graphics.aspx https://www.ers.usda.gov/topics/food-nutrition-assistance/fo... [3] https://endhomelessness.org/homelessness-in-america/homelessness-statistics/state-of-homelessness-2020/ https://endhomelessness.org/homelessness-in-america/homeless...
noch 6y ago
The paper says: > The question is whether the bimodality is symptomatic of a poverty trap, namely whether poor people do casual jobs and hold nearly no productive assets because they do not have the talent to do anything else or whether the fact that they are poor prevents them from acquiring the assets needed to climb the occupational ladder. The cause/effect inversion, of talent/ability => asset acquisition, is always worrying. We might benefit, as a society, if we confront the IQ problem honestly and head-on, in order to have a more complete/accurate policy picture especially because it seems reasonable that wealth transfers should be optimised to enable higher productivity. Consider: "The Bell Curve Review:IQ Best Indicates Poverty"(Benjamin, 2018), in which: > I find that IQ is more correlated with poverty than socio-economic-status in every regression, regardless of what is included in the regression, by a factor of 3. Also: Hsu(2015) https://infoproc.blogspot.com/2015/04/income-weath-and-iq.html https://infoproc.blogspot.com/2015/04/income-weath-and-iq.ht... > Income mobility is strongly affected by IQ. In fact, IQ is a much stronger predictor variable than race for escaping the bottom quintile of income.
- jasonwatkinspdx 6y ago
  You really should read some criticisms of The Bell Curve style arguments. I'd start here: https://www.nyu.edu/gsas/dept/philo/faculty/block/papers/Heritability.html https://www.nyu.edu/gsas/dept/philo/faculty/block/papers/Her...
  - noch 6y ago
    The article you linked to is helpful but makes several important claims/conclusions that have been convincingly disproved/challenged in the time since 1996. For instance, it claims: > In fact IQ is a great example of a trait that is highly heritable but not genetically determined [...] However, "On the genetic architecture of intelligence and other quantitative traits" (Hsu, 2014, https://arxiv.org/abs/1408.3421 https://arxiv.org/abs/1408.3421) which cites a substantial amount of supporting research, notes: "The largest component of genetic variance for both height and intelligence is additive(linear), leading to important simplifications in predictive modeling and statistical estimation. Due mainly to the rapidly decreasing cost of genotyping, it is possible that within the coming decade researchers will identify loci which account for a significant fraction of total g variation." Block(1996) also incorrectly asserts that: > IQ is enormously affected by normal environmental variation, and in ways that are not well understood. [...] IQ is very reactive to changes in environments in the normal range. From Hsu(2014): "[W]ithin a range of favourable environments (i.e., providing good nutrition, hygiene, and access to education) evidence strongly supports the claim that individual differences in cognitive ability are largely associated with genetic differences.
jokit 6y ago
This reminds me of the study of how long people tend to hold onto a FRN. https://moneymaven.io/blackwealthchannel/community-building/asians-keep-a-dollar-in-their-community-120-times-longer-than-african-americans-2ZvNTGNxpkClloXlXK_wMQ https://moneymaven.io/blackwealthchannel/community-building/...
jfrunyon 6y ago
Easy answer: because expenses are higher for poor people. Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life. Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. And then they have to spend more money on gas (or bus fare, or a taxi, or time and energy walking, or ...) to get to the store again sooner. Instead of the employer providing any supplies that are needed, the lower class have to buy their own uniforms or tools. Instead of a 5% interest rate on their loan, they have a 25% interest rate. Because they don't make enough money to set some aside as savings, they have to pay late fees or NSF fees or overdraft fees.
- missedthecue 6y ago
  Why have the poor gotten richer over time then? We don't have the same percentage of rich and poor as we always have had.
  - arcticbull 6y ago
    I think what you've identified is that the poor have gotten better off due to technical innovations reducing the price of basic goods and enhancing their functionality -- while on average wages have tracked inflation. This is a systemic improvement. Meanwhile, the rich have gotten exponentially richer, as public policies have shifted ever more in their favor. For much the 1900s the top income tax bracket in the US was over 80%, peaking at 95%. Now its 37%. The estate tax for much of the 1900s was 80%. Now it's practically 0% for all intents and purposes. The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. Systems designed to keep the two groups together have been chipped away at, and are buckling. This is a result of social policy.
    - credit_guy 6y ago
      > The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. That's a fairly common perception. Most often summarized in "the rich get richer, the poor poorer" (at least on a relative basis). I was born in a Communist country, and I have another perception. Poverty has different levels. The most abject poverty is when you go hungry. My family didn't experience that, but we experienced the next step: severe food rationing. War-style rationing in peace times. 90% of the population in my city being subjected to that (the elite party members were not, obviously). My parents driving to a neighboring city to be able to buy potatoes and onions. My kids nowadays spend too much time on iPads and Xbox, I was spending too much time waiting in line to buy bread. And I can only guess that there were hundreds of millions like me in all the Communist world (China included). For the most part this type of poverty has been eradicated. I for one celebrate that.
abellerose 6y ago
People stay poor because all the past unfairness never goes away. It clings to them. Real survivorship bias exists to muddy the reality of how bad it truly is to have bad things happen in early life. A lot of people can simply never recover when they were kicked so unfairly in early life contrary to their peers. I believe it’s why there used to be experiments with lsd to see if memories could be erased.
tehjoker 6y ago
Because we decided to place as many things in the market as possible, so necessities of life like housing and food can only be got via labor for the employer class who underpay (that's where profit comes from) and if they don't like you you can't even access that low pay and become homeless and either starve, live off charity, or eat extremely unhealthily which reduces your capacity to be useful to the employer class over time. Redefining basic necessities as human rights and placing them outside the market will do so much to reduce poverty it will blow peoples' minds. However, this will of course come at the expense of the privileges of the powerful so such things are opposed. It's helpful to think of this as a design question. Do we design a UI that many users fail at or is the problem the system design?
frogpelt 6y ago
Studies like this boil down a hugely complex issue into variables they can control for. There are a lot more theories as to why people stay poor than the two they offer at the beginning. Why don't we study all of the people who have definitely risen from the ranks of the poor to a higher class and see what they have in common? Sure, it's not the norm. But it happens all the time. There is enough data to form an opinion. I'm guessing the way people rise from the poverty is much the same as people who are average becoming wealthy. They are willing to take risks (i.e., leave your neighborhood, buck the trends in your family tree) and they work on being prepared and available for opportunities that may present themselves. We also know there are certain behaviors that absolutely correlate to and probably perpetuate generational poverty (children out of wedlock, crime, quitting school). The people I know who have risen out of inner city poverty in the U.S. (not the same as Bangladesh I know) distanced themselves from these behaviors and from the people who considered them okay.
wayanon 6y ago
When you’re stressed you don’t make good decisions. You choose the fatty food, TV, booze because you want to cheer yourself up. Making ‘good decisions’ is so much easier when you have an income and you’re not avoiding creditors calls. I’ve lived through it. It was exhausting.
bmmayer1 6y ago
Here's a better question: how do people become rich? Being poor is table stakes for being a human animal. The miracle of modern society is that billions of people aren't poor (as high as 90% according to Hans Rosling[1]). How did we make that happen? How do we make it happen for everyone? [1]https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds?stackMode=relative https://ourworldindata.org/grapher/distribution-of-populatio...
- ellis-bell 6y ago
  correct, 90% of people make more than $1.90 ppp according to the data. but only 35% make more than $10 a day. the poverty line is defined generously at ~$2 / day by most oecd countries, but making above the poverty line does not make you not poor. all of that said, the field of development economics has been very rich in research these days, particular from the likes of duflo and banerjee
  - bmmayer1 6y ago
    The chart measurement is in constant PPP dollars and clearly shows a downtrend in all poverty worldwide over time. Obviously the line of what constitutes "poor" is debatable, but what's far more interesting is the continuing growth in people who are rich.
sul_tasto 6y ago
Wealth, in it’s most fundamental form, is a mindset.

169 points by zackhsi 6y ago

> Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated at baseline and that the gains arising from eliminating misallocation would far exceed the costs. Our findings imply that large one-off transfers that enable people to take on more productive occupations can help alleviate persistent poverty. Balboni, C, Bandiera, O, Burgess, R, Ghatak, M and Heil, A. 2020. 'Why do people stay poor?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14534 https://cepr.org/active/publications/discussion_papers/dp.ph...

pmiller2 6y ago

Off topic, but I would recognize \documentclass{article} anywhere.

bschne 6y ago

To anyone interested in the topic, I recommend reading Duflo & Banerjee's 2011 book "Poor Economics". They pioneered the approach of using RCTs to test interventions in fighting poverty (for which they received the Nobel Memorial Prize together with Michael Kremer). They go into a lot of factors as to why poor people get certain economic outcomes, including but not limited to the poverty trap theory, and take a refreshingly "humane" / respectful view towards the people they are dealing with.

simulo 6y ago
I second that. The RCTs get discussed most often. But what was eye-opening for me were their observations on how poor people manage the few resources they have matching the infrastructure they can access – like investing in bricks (Ch8)

emsign 6y ago

My hot guess: because of capitalism. It needs the exploitation of the weak.

KorematsuFred 6y ago
It is out of academic fashion these days to blame Capitalism in papers directly. It is often arrived at very indirectly.
chrisco255 6y ago
Poverty is the base case. It's the default state. How does prosperity increase at all?
- claudiawerner 6y ago
  There are a number of interesting responses to the idea that poverty is the base case or default in some way here: https://www.reddit.com/r/samharris/comments/f12rl0/poverty_is_the_default_state_of_humankind/ https://www.reddit.com/r/samharris/comments/f12rl0/poverty_i... What do we mean by default? Would we say that the default state of a child is surviving without their mother? Is a lack of breast milk or shelter the default? I can easily imagine a situation (I.e. a functioning society) in which poverty is not the default. If poverty is defined to mean having below a certain daily wage[0], then how is that "default"? Do we mean absolute or relative poverty? Just like default settings in your favourite program presuppose the program itself, it seems poverty presupposes a system where some people make above $<poverty threshold> a day and some do not. To say that poverty is the 'default' without also specifying to whom and in which society it is the default is either useless information, or an apparently irrelevant claim that only concerns some cases in the early stages of human pre-civilization. [0] Beware that if you disagree with this supposition, you lose the ability to claim that statistics which use increase in daily wage indicate moving out of poverty. The case for saying that capitalism does away with poverty depends on this definition of poverty.
  - luckylion 6y ago
    > I can easily imagine a situation (I.e. a functioning society) in which poverty is not the default. You're imagining a society that has overcome the default state and maintains their progress. They haven't changed the default. A machine's default state isn't being powered, but if you power up a machine and keep feeding it power and maintain it well, you can rely on it being powered. Once you stop maintaining it, or stop providing power, it will go back to the default state of not being powered. > Do we mean absolute or relative poverty? Absolute if you want to get anywhere. Unless you distribute everything perfectly equal, you'll always have one half that makes less than the median.

roenxi 6y ago

I'm not going to comment about the article without reading it carefully; but just in case there are any aspiring data analysts online there is a chart that is interesting even without knowing anything about the data... On page 64 (65 as the PDF numbers it), chart (b) "Distribution of savings rate" has an awkward little peak on the left hand side of the chart. It is very difficult to tell from inspection whether that is a real feature of the underlying data or if it is an artefact naive kernel density estimation. If you ever see that pattern in your graphs, do consider trying logKDE [0] rather than ordinary Kernel Density Estimation a la geom_density() in ggplot. It also isn't perfect but the result is usually a bit better for things that approximate an exponential distribution. [0] https://cran.r-project.org/web/packages/logKDE/vignettes/logKDE.pdf https://cran.r-project.org/web/packages/logKDE/vignettes/log...

JamesBarney 6y ago
I think that's a real effect. Intuitively I would imagine a lot more people save 0% (or close to 0%) of their income than save 50% of their income, I would also expect a lot more people to save or overspend 3% of their income than overspend or save 25% of their income.

Toine 6y ago

TLDR; "We have shown that poverty traps exist. People are poor because of a lack of opportunity. It is not their intrinsic characteristics that trap people in poverty but rather their circumstances. Poverty is not an innate condition. This has implications for how we think of development policy and for the value of eliminating global poverty."

lazyjones 6y ago
Based on data from the Third World and destined to be used to argue for policy changes (towards wealth redistribution) in the First World.
- jyounker 6y ago
  This is anecdotal, but having grown up poor, I can tell you that the research is perfectly applicable in the first world.
  - lazyjones 6y ago
    And I grew up poor and can tell you it's not. In the First World, you have other opportunities to earn wealth than having more than enough livestock. Go to school, study something worthwhile, start a company and prosper.
domnomnom 6y ago
That sort of epistemological tone is quite painful to see.

jcun4128 6y ago

Without making the jump from washing plates/factory work to software I don't know how I would have escaped(still haven't) considering my pay increased 4 times. Just brutal when you trade hours for money directly at a low rate, I was doing 70hrs washing plates before and it was nothing ha. Edit: there is the thought of living within your means, personally with a roommate I could live on $10-$20K a year which you can make doing labor jobs but not a lot saving. I'm lucky being single/having no direct responsibility eg. children. It is my opinion though that if you want to/have internet/time then you can alter your life for the better, but yeah can't just say "learn to code". But other options available. I see the point about opportunity because I had a friend to crash on his couch when I was technically homeless that is helpful/bare min opportunity. My jump was not fast, it took at least 2 years not including the 3 years before that of self-study/personal interest. I freelanced on the side while working as a dishwasher before first in office/full time job.

adventured 6y ago
What language/s did you teach yourself during that several year learning time? What did you choose to focus on? (I noticed this: ReactJS/Node-Express/MySQL/Python in your profile, but I'm not sure if that's what you started with)
- MaximumYComb 6y ago
  His stack indicates web dev, which is the typical path for self taught programmers. Plenty of work available that pays more than minimum wage.
  - jcun4128 6y ago
    Yeah I have not really gone down into the C/C++ that level and I haven't touched the Microsoft side eg. .NET Closest thing for "native" is using the wrappers for JS which for my needs works. I did have to force myself to figure out how to get a basic Android widget (Java) to work that was tough.
- jcun4128 6y ago

oblio 6y ago

I'll probably read the whole thing at some point, but I'd say that it's due to the https://en.wikipedia.org/wiki/Mediocrity_principle https://en.wikipedia.org/wiki/Mediocrity_principle, basically "don't assume you're special". Or "don't assume any one sample of a thing is special", from the start. And since the natural state of humanity is poverty (after all we all started as hunter-gatherers), breaking out of it on your own is extraordinary. I wouldn't be surprised that the first communities to break out of poverty had 1 extraordinary individual that lifted their entire family/clan/tribe. Then through social osmosis more people in their vicinity were lifted, provided they cooperated/were open enough to the new thing that made their neighbors rich/were not discriminated for a million reasons/...). Look at the Industrial Revolution. It basically spread geographically from the UK and is also spread socially to UK off-shoots, first.

truckerbill 6y ago
That specific principle you linked to seems to be saying something different to your hypothesis - it’s arguing the idea that a sample of one doesn’t let you assume something is unique.
- oblio 6y ago
  If you extrapolate it a bit, it does say what I'm saying. I am a sample of one, too. You too, are a sample of one :-) Why would I be special? Why would you be special? We all tend to think we're amazing (and our families/clans/tribes/cities/countries), in many cases with very flimsy reasoning. I'll rephrase my comment.
  - truckerbill 6y ago
    Ah, makes more sense when you put it that way!
La1n 6y ago
>And since the natural state of humanity is poverty (after all we all started as hunter-gatherers), breaking out of it on your own is extraordinary. The natural state was sharing resources and taking care of a small group of people. Not working for a boss.

mNovak 6y ago

>> The threshold above which people no longer regress into poverty is 9,309 BDT (504 USD PPP) Am I understanding PPP correctly--this is a value equivalent to what $500 buys in the US? That's surprising because the paper states this is above the amount available for conventional microfinance; I didn't realize it was indeed that "micro".

accurrent 6y ago
Yes. You'll be surprised by how much $100 can get you in a developing country and how few people actually have access to even that amount of money.
- La1n 6y ago
  But that doesn't matter here, read the previous comment again >this is a value equivalent to what $500 buys in the US?

feralimal 6y ago

For the individual, the answer is Debt. And servicing repayments of debt. Eg, that on the typical mortgage you repay ~3 times what you borrowed.

nicbou 6y ago
3 times? How so?
- feralimal 6y ago
  Sorry - my mistake. I was going off memory. 2 times, including the principle. Looking here: https://finance.icalculator.info/mortgage-calculator.html https://finance.icalculator.info/mortgage-calculator.html I enter, Mortgage Amount: 100000 Annual Interest Rate: 5% Term of Mortgage: 30years The interest paid is 93255.20
  - blaser-waffle 6y ago
    That's also a 30-year mortgage, paid off at the lowest rate possible, with no refinancing. And also leaves out that the rate of inflation over 30 years means your monthly cost decreases; hopefully you're getting inflation adjustments to your salary...
  - benibela 6y ago
    But that is still cheaper than paying rent for 30 years
    - bbeekley 6y ago
      I semi-regularly plug numbers into this Buy v Rent calculator by NYT [1]. They're pretty equivalent in the 10-30 year range and match housing prices I've seen. It's hard to beat the SP500's >8% average return [2]. [1] (paywalled) https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal... [2] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...

globular-toast 6y ago

This seems to be "Why do people stay in poverty?" "Poor" has a different meaning depending on who you ask. For example, students are popularly considered "poor". Some people would consider themselves "poor" if they can't afford a car. Some people consider themselves "poor" because they are not millionaires.

woodandsteel 6y ago
I have not read the article, but assume that their use of the term "poor" was carefully defined.
- globular-toast 6y ago
  Yeah but my comment was more about the fact people here are talking about mortgages and things. Not really the same kind of poor.
  - woodandsteel 6y ago
    Oh, ok.

TrackerFF 6y ago

This is something I enjoy about our jobs up in Scandinavia - the salaries are very compressed around the mean. Engineers, Lawyers, and other similar professions tend to earn 2x-3x of what the absolute minimum wage jobs earn. That's quite the difference compared to other countries, where Engineers can earn 5x-20x. People here are still motivated to seek higher education and better paid jobs, even though they could live normal lives off those lowest paid jobs that don't require any education.

Kiro 6y ago
I agree but considering the minimum wage is 0 I don't understand how you came up with the 2x-3x number.
- djrobstep 6y ago
  Nordic countries have minimum wages defined by collective bargaining agreements rather than the law - because unionization is so strong and the agreed minimums are relatively good, they don't really need national legal ones.
  - Kiro 6y ago
    Yes, but it's still optional. Only 39% of small companies have signed a collective agreement in Sweden. Companies refusing unionization and paying way below the union rates is a real problem: https://www.breakit.se/artikel/7599/i-spent-two-weeks-delivering-for-uber-eats-and-made-4-4-per-hour https://www.breakit.se/artikel/7599/i-spent-two-weeks-delive... Even most people in Sweden think there is a legal minimum wage and are surprised to hear it's 0 and that you can legally pay someone 0.01 an hour.
- TrackerFF 6y ago
  Yes, we - at least in Norway - don't have any official minimum wage, but a good rule of thumb is that the majority of unskilles non-industrial jobs start around 150 NOK / hr. +/- 15 NOK. Or annually around 275k-345k NOK In USD, that around $16.5 +/- $1.5. $30k - $39k year. The vast majority of professional jobs which require a BS or MS start between 450k-600k / $50k-$67k, and will by end of career be around 600k - 1MM / $50k - $110k. But keep in mind, there are several factors at play: - private pays more that public jobs - industry salaries differs wildly - location plays a big role - lots of outlier jobs pay much more than the above - The numbers above are based on current USD/NOK rates, which is very weak for us Norwegians. It's right now around 9, but has been down around 5 during the good years. So one needs to look at salaries as a relative thing. Edit: But we DO have union wages, which effectively work as minimum wages for many professions. But alas, there are lots of jobs with no unions.

hprotagonist 6y ago

The reason that the rich were so rich, Vimes thought, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and _would still have wet feet_." This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.

AaronLasseigne 6y ago
Yup, being poor is expensive.
refurb 6y ago
I'm not trying to generalize, because I know poor people who are poor through no fault of their own (and we should provide public support for them), but I also know a larger number of people who contributed to their own dire financial situation and it wasn't because they couldn't afford quality boots, it was because they over-extended themselves with new cars, a way too big house, the big screen TVs and expensive trips and meals.
- grugagag 6y ago
  Let me guess, credit card debt. I would take into consideration also the trap that creditcard companies set for unsuspecting folk, who make the mistakes themselves, is true ,but who were set up into a trap way before spending any penny.
- benlivengood 6y ago
  And bankruptcy fixes things for the latter folks because they have a good, stable income.

nimbius 6y ago

A sterling argument could be made that Capitalism as a concept requires a permanent underclass of low income workers. for example, Guardiola-Rivera believes that poverty and inequality are political issues that can only be solved when the poor organise and come up with a solution to liberate themselves. Rising income inequality is breeding more inequality in educational opportunity, which results in greater inequality in educational attainment. That, in turn, undermines the intergenerational mobility upon which Americans have always prided themselves and perpetuates income inequality from generation to generation. This dynamic all but guarantees a permanent underclass.

rayiner 6y ago

This is why Booker/West-style baby bonds could have a significant chance to alleviate structural poverty. Beyond a certain threshold (and I think we’re past that in the US) equality of opportunity (better education, etc.) won’t make up for starting out poor. What people need is seed capital. For a fraction of the cost of universal healthcare, we could endow each child born in the US with a $250,000 trust fund at birth. That would be game changing.

jeffbee 6y ago
What would be the point of such trust funds? Assuming they were not intended to pay out until higher education (age 18?) it would just look exactly like Social Security: a supposedly-funded massive future liability that the federal budget borrows against and/or repeatedly attempts to privatize. Except your idea would receive even higher contributions than Social Security does.
- rayiner 6y ago
  Are you asking what people would be able to use $250k for?
  - jeffbee 6y ago
    No, I'm asking why it would be structured like that. It seems like an open invitation to just raid and squander it. If you took the same amount of money you could, just as an example, permanently endow a professional educator for every 20 births, which begins paying off right away, instead of decades later.
    - rayiner 6y ago
      I think spending the money on a “professional educator” would be squandering it. This country has huge inequities, and I don’t think you can solve it by throwing money at college educated (disproportionately white) people.
      - 6y ago

drbojingle 6y ago

off the top of my head I think it depends on the type of poor you are. Some people are poor because of their situation and some situations are more difficult to escape than others. Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor.

woodandsteel 6y ago
>Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor. That's true. But often the reason they have those bad habits is they were taught them by the environment that, through no choice of their own, they were born in.
- quickthrowman 6y ago
  Absolutely. It’s not only bad habits they were taught, but the huge amount of things they weren’t taught. I was taught how to budget, how compound interest works, and so on by family members. I used to do rental property maintenance in places where people didn’t know to use a dish strainer to prevent sink clogs, nobody ever taught them. Now, spread that out over hundreds or thousands of other things they’re not aware of. There’s tons of useful knowledge that middle/upper class people pass down t their kids that poor people have no clue about.
  - mythrwy 6y ago
    Agreed. And knowing is not enough, you have to have enough discipline or environmental training to act at the appropriate junctures.
- drbojingle 6y ago
  Sure, but you can learn bad habits regardless of the environment you were born into and you can fix those habits too, if you're so inclined to reflect and practice. This is very different than having your father die while you're young and promising to be the woman of the house and take care of your sick mom and baby sister.

theodric 6y ago

I also know some people who have a poor mentality. That is, they consistently refuse to seek out better-paying opportunities despite abundant mental ability in the name of "happiness," complain that their series of low-paying roles deserve more money, and advocate for hard socialism to enable redistribution to make that possible. The problem, you see, is all the other people.

kergonath 6y ago
Them, and those straw men.

centimeter 6y ago

Wealth is mean-reverting along genetic lines. I.e if your removed ancestors were poor, but your immediate ancestors were rich, chances are you or your descendants will revert to being poor. Together with available data conditioned on factors like geography and ethnic background, by far the most likely hypothesis is that expected wealth is mediated by factors like intelligence and time preference, which are strongly genetically heritable.

frank_bb 6y ago

Simply, because of banksters, rotten owners of manipulated 'financial system' - the rothschilds & their bitch€s, institutions, and so on. Killuminati. That system is very easy to manipulate (for them, not for us)... They've created the most powerful currency ever. No, not USD, but the DEBT. With this, they can do everything today, as they owe also governments and the rest. They can create 'crisis' just like that, usually to rob working people of valuable assets (that comes from real work, not from usury), to cover their worthless (melting since '71) "money". And tell the people that's their fault. Again and again. Decade by decade. The sad thing is that so many people still believes in that whole rotten, satanic system; only some people have their minds open enough to understand this, to know that's our sad reality (it's not about what we believe in, but what we SEE); the others are blind, 'too busy' or 'too lazy' even to think, so it's easier to call it 'conspiracy, theories, etc'. Today, if mainstream fng media call something as 'conspiracy', you should think about that twice and analyze why. Same about pseudo "law", that concerns us, but doesn't apply to them... Which promotes deviation, but banishes almost everything that is actually good for us. That why people do stay poor - because of corrupt puppet governments owned by these 'elites'... The humanity should have much bigger, much better, beautiful achievements so far! But that's impossible in this system, which makes the people focusing mainly on bullshit, instead of things, that really matters! What people can do? Well, nothing special, just WAKE UP and start to think! The more the better. This is what the system fears: awake, thinking people. People who have the potential to be free... The system needs slaves! That's why the world looks what it looks like, that's why people suffer - needlessly! Thank you & good luck (we all need it).

paulpauper 6y ago

Why does every econ paper these days read like a high-energy physics paper? I feel like I am reading about field theory, not econ.

marcosdumay 6y ago
Hum... What exactly did you expect? It has a simple stochastic model and some statistics for verifying if the real world agrees with it. You are deluding yourself if you think one can study economics without advanced statistics.
- paulpauper 6y ago
  so how does one account for early economics writing being light on math. Were economists Adam Smith, Hayek, and Ricardo deluded because they did not know advanced stats?
  - marcosdumay 6y ago
    Up to a point, yes. They did get many conclusions that are easily disproved today.
- JamesBarney 6y ago
  Are these study's preregistered? It seems like there is so many degrees of freedom the researcher could easily take a stroll through the garden of forking paths.
  - marcosdumay 6y ago
    > Are these study's preregistered? No idea. I like this study, it doesn't have as many degrees of freedom as is usual, the theory is kept to a minimum, and the data is kept to the maximum available. But you are right, there is still a lot to go wrong. Anyway, I haven't seen many empiric studies of poverty traps. The real test is, given many of those if they will agree with the theory, not what any single one says.
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perfmode 6y ago

does anyone read Piketty?

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ghufran_syed 6y ago

I’m not qualified to judge the technical merits of the paper, but their conclusion seems plausible. They concluded that in an illiterate rural population, there did seem to be a threshold effect in asset levels above which it seemed much easier to progress economically. But it’s unclear to me how applicable this is to the poor in the US or other developed economies, particularly when we’re talking about a population where almost everyone can read and write, and many of them have cellphones and internet access. Part of the reason that many people (including my family) try to emigrate from developing countries to more developed economies is that the same person, with the same skills, can be vastly more productive in those economies, which is what allows that person to have a much better lifestyle. And much of the reason that high-productivity jobs are not available in those poor countries is because of a lack of capital. So it makes sense that giving the poor some minimal amount of capital is required, so that those same people can be more productive. But it seems unlikely to me that adding capital (increasing the assets of poor people) would have the same beneficial effect in developed economies, given the large pre-existing ‘capital stock’ This [article](https://www.forbes.com/sites/timworstall/2014/08/27/by-global-standards-there-are-no-american-poor-all-in-the-us-are-middle-class-or-better/#1c00d8035cb5 https://www.forbes.com/sites/timworstall/2014/08/27/by-globa...) describes what american poverty levels would be if we used the same measure as we do in developing countries and makes the point that by those measures there are no poor people in the US, just “lower middle class”. That doesn’t mean we shouldn’t try and improve the lives of people at the lower end of the income distribution, but we should at least understand that when we use the term poverty in developing and developed economies, we’re talking about something qualitatively and quantitatively different - so the optimal solutions are likely different too.

badRNG 6y ago
> by those measures there are no poor people in the US That doesn't feel like a meaningful metric when there are as many as 17% of mothers with young children experiencing food insecurity [1]. Perhaps that's due to COVID, but 11% of households were food insecure as recently as 2018 [2]. Around half a million Americans are homeless, and 35% of them are shelterless [3]. Are all of these people "not poor" and are they "middle class"? This all to say that how we think about poverty should focus more on the outcomes that people actually experience (access to food, shelter, healthcare, etc) than key economic indicators. Claims like "the War on Poverty is over" and "there are no poor people in the US" don't seem to match up with the lived experiences of many Americans. [1] https://www.brookings.edu/blog/up-front/2020/05/06/the-covid-19-crisis-has-already-left-too-many-children-hungry-in-america/ https://www.brookings.edu/blog/up-front/2020/05/06/the-covid... [2] https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/key-statistics-graphics.aspx https://www.ers.usda.gov/topics/food-nutrition-assistance/fo... [3] https://endhomelessness.org/homelessness-in-america/homelessness-statistics/state-of-homelessness-2020/ https://endhomelessness.org/homelessness-in-america/homeless...

noch 6y ago

The paper says: > The question is whether the bimodality is symptomatic of a poverty trap, namely whether poor people do casual jobs and hold nearly no productive assets because they do not have the talent to do anything else or whether the fact that they are poor prevents them from acquiring the assets needed to climb the occupational ladder. The cause/effect inversion, of talent/ability => asset acquisition, is always worrying. We might benefit, as a society, if we confront the IQ problem honestly and head-on, in order to have a more complete/accurate policy picture especially because it seems reasonable that wealth transfers should be optimised to enable higher productivity. Consider: "The Bell Curve Review:IQ Best Indicates Poverty"(Benjamin, 2018), in which: > I find that IQ is more correlated with poverty than socio-economic-status in every regression, regardless of what is included in the regression, by a factor of 3. Also: Hsu(2015) https://infoproc.blogspot.com/2015/04/income-weath-and-iq.html https://infoproc.blogspot.com/2015/04/income-weath-and-iq.ht... > Income mobility is strongly affected by IQ. In fact, IQ is a much stronger predictor variable than race for escaping the bottom quintile of income.

jasonwatkinspdx 6y ago
You really should read some criticisms of The Bell Curve style arguments. I'd start here: https://www.nyu.edu/gsas/dept/philo/faculty/block/papers/Heritability.html https://www.nyu.edu/gsas/dept/philo/faculty/block/papers/Her...
- noch 6y ago
  The article you linked to is helpful but makes several important claims/conclusions that have been convincingly disproved/challenged in the time since 1996. For instance, it claims: > In fact IQ is a great example of a trait that is highly heritable but not genetically determined [...] However, "On the genetic architecture of intelligence and other quantitative traits" (Hsu, 2014, https://arxiv.org/abs/1408.3421 https://arxiv.org/abs/1408.3421) which cites a substantial amount of supporting research, notes: "The largest component of genetic variance for both height and intelligence is additive(linear), leading to important simplifications in predictive modeling and statistical estimation. Due mainly to the rapidly decreasing cost of genotyping, it is possible that within the coming decade researchers will identify loci which account for a significant fraction of total g variation." Block(1996) also incorrectly asserts that: > IQ is enormously affected by normal environmental variation, and in ways that are not well understood. [...] IQ is very reactive to changes in environments in the normal range. From Hsu(2014): "[W]ithin a range of favourable environments (i.e., providing good nutrition, hygiene, and access to education) evidence strongly supports the claim that individual differences in cognitive ability are largely associated with genetic differences.

jokit 6y ago

This reminds me of the study of how long people tend to hold onto a FRN. https://moneymaven.io/blackwealthchannel/community-building/asians-keep-a-dollar-in-their-community-120-times-longer-than-african-americans-2ZvNTGNxpkClloXlXK_wMQ https://moneymaven.io/blackwealthchannel/community-building/...

jfrunyon 6y ago

Easy answer: because expenses are higher for poor people. Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life. Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. And then they have to spend more money on gas (or bus fare, or a taxi, or time and energy walking, or ...) to get to the store again sooner. Instead of the employer providing any supplies that are needed, the lower class have to buy their own uniforms or tools. Instead of a 5% interest rate on their loan, they have a 25% interest rate. Because they don't make enough money to set some aside as savings, they have to pay late fees or NSF fees or overdraft fees.

missedthecue 6y ago
Why have the poor gotten richer over time then? We don't have the same percentage of rich and poor as we always have had.
- arcticbull 6y ago
  I think what you've identified is that the poor have gotten better off due to technical innovations reducing the price of basic goods and enhancing their functionality -- while on average wages have tracked inflation. This is a systemic improvement. Meanwhile, the rich have gotten exponentially richer, as public policies have shifted ever more in their favor. For much the 1900s the top income tax bracket in the US was over 80%, peaking at 95%. Now its 37%. The estate tax for much of the 1900s was 80%. Now it's practically 0% for all intents and purposes. The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. Systems designed to keep the two groups together have been chipped away at, and are buckling. This is a result of social policy.
  - credit_guy 6y ago
    > The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. That's a fairly common perception. Most often summarized in "the rich get richer, the poor poorer" (at least on a relative basis). I was born in a Communist country, and I have another perception. Poverty has different levels. The most abject poverty is when you go hungry. My family didn't experience that, but we experienced the next step: severe food rationing. War-style rationing in peace times. 90% of the population in my city being subjected to that (the elite party members were not, obviously). My parents driving to a neighboring city to be able to buy potatoes and onions. My kids nowadays spend too much time on iPads and Xbox, I was spending too much time waiting in line to buy bread. And I can only guess that there were hundreds of millions like me in all the Communist world (China included). For the most part this type of poverty has been eradicated. I for one celebrate that.

abellerose 6y ago

People stay poor because all the past unfairness never goes away. It clings to them. Real survivorship bias exists to muddy the reality of how bad it truly is to have bad things happen in early life. A lot of people can simply never recover when they were kicked so unfairly in early life contrary to their peers. I believe it’s why there used to be experiments with lsd to see if memories could be erased.

tehjoker 6y ago

Because we decided to place as many things in the market as possible, so necessities of life like housing and food can only be got via labor for the employer class who underpay (that's where profit comes from) and if they don't like you you can't even access that low pay and become homeless and either starve, live off charity, or eat extremely unhealthily which reduces your capacity to be useful to the employer class over time. Redefining basic necessities as human rights and placing them outside the market will do so much to reduce poverty it will blow peoples' minds. However, this will of course come at the expense of the privileges of the powerful so such things are opposed. It's helpful to think of this as a design question. Do we design a UI that many users fail at or is the problem the system design?

frogpelt 6y ago

Studies like this boil down a hugely complex issue into variables they can control for. There are a lot more theories as to why people stay poor than the two they offer at the beginning. Why don't we study all of the people who have definitely risen from the ranks of the poor to a higher class and see what they have in common? Sure, it's not the norm. But it happens all the time. There is enough data to form an opinion. I'm guessing the way people rise from the poverty is much the same as people who are average becoming wealthy. They are willing to take risks (i.e., leave your neighborhood, buck the trends in your family tree) and they work on being prepared and available for opportunities that may present themselves. We also know there are certain behaviors that absolutely correlate to and probably perpetuate generational poverty (children out of wedlock, crime, quitting school). The people I know who have risen out of inner city poverty in the U.S. (not the same as Bangladesh I know) distanced themselves from these behaviors and from the people who considered them okay.

wayanon 6y ago

When you’re stressed you don’t make good decisions. You choose the fatty food, TV, booze because you want to cheer yourself up. Making ‘good decisions’ is so much easier when you have an income and you’re not avoiding creditors calls. I’ve lived through it. It was exhausting.

bmmayer1 6y ago

Here's a better question: how do people become rich? Being poor is table stakes for being a human animal. The miracle of modern society is that billions of people aren't poor (as high as 90% according to Hans Rosling[1]). How did we make that happen? How do we make it happen for everyone? [1]https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds?stackMode=relative https://ourworldindata.org/grapher/distribution-of-populatio...

ellis-bell 6y ago
correct, 90% of people make more than $1.90 ppp according to the data. but only 35% make more than $10 a day. the poverty line is defined generously at ~$2 / day by most oecd countries, but making above the poverty line does not make you not poor. all of that said, the field of development economics has been very rich in research these days, particular from the likes of duflo and banerjee
- bmmayer1 6y ago
  The chart measurement is in constant PPP dollars and clearly shows a downtrend in all poverty worldwide over time. Obviously the line of what constitutes "poor" is debatable, but what's far more interesting is the continuing growth in people who are rich.

sul_tasto 6y ago

Wealth, in it’s most fundamental form, is a mindset.