9 ms·

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

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.
    - quercusgrisea 6y ago
      Food insecurity is not specific to communist countries, it's a massive problem in capitalist countries today. The US is the richest country in the world and 37 million people experienced food insecurity in 2018 - https://en.wikipedia.org/wiki/Hunger_in_the_United_States https://en.wikipedia.org/wiki/Hunger_in_the_United_States
      - missedthecue 6y ago
        "Food insecurity" is nowhere near the same thing as going to another city to stand in line for potatoes and onions. On the whole, decentralized distribution is always better than when centrally controlled
        quercusgrisea 6y ago
        >"Food insecurity" is nowhere near the same thing as going to another city to stand in line for potatoes and onions. What's the difference? Millions of people in the US have to line up at soup kitchens and food banks in order to avoid starvation. >On the whole, decentralized distribution is always better than when centrally controlled That's a strong claim; I'd be interested to look at evidence for it if you have any. One major counterpoint would be the enormous reductions in poverty that China has achieved over the last decades. Quoting from Wikipedia here: >The dramatic progress in reducing poverty over the past three decades in China is well known. According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China's poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms. https://en.wikipedia.org/wiki/Poverty_in_China https://en.wikipedia.org/wiki/Poverty_in_China
  - ChrisLomont 6y ago
    >For much the 1900s the top income tax bracket in the US was over 80%, Top tax is not the same as effective tax rate. For example, when Reagan lowered the top brack from 50% to 37% while also closing taxable shelters,the amount the rich paid actually went up. The CBO has all this type of data. >This is a result of social policy. It's more the result of changes in the world economy. Computers have made skilled jobs vastly more productive, while unskilled like making burgers or painting exteriors have not seen anywhere near the gains. And as the rest of the world is catching up quickly to first world quality of life, the advantage the poor in the US had on the world labor supply is much less. >while on average wages have tracked inflation Only for white men in the US (and most first world countries). Poor women and minorities have seen vast gains in income over the past 40 years in the first world. The rest of the world has seen a massive gain for the poor. Remember, the poverty line in the US is about the top 15% of incomes worldwide. Our poor are quite rich by world or historical standards. You used to be able to check this at globalrichlist.com, but it's now down. I suspect you can find this info elsewhere. As some easy evidence to check, poverty line for a household of three in the US is $21k (and that pre-tax transfer. Post transfer is about 40k). Here's per country median incomes. https://worldpopulationreview.com/country-rankings/median-income-by-country https://worldpopulationreview.com/country-rankings/median-in...
    - deleted 6y ago
      [deleted]
    - missedthecue 6y ago
      >Top tax is not the same as effective tax rate. For example, when Reagan lowered the top brack from 50% to 37% while also closing taxable shelters,the amount the rich paid actually went up. This is something a lot of folks miss. The US has the most progressive tax system in the western world. The top brackets pay a much larger percentage than anywhere else.
      - arcticbull 6y ago
        Yeah, no, they don't, and it isn't. Estate tax being practically zero means huge quantities of un-earned wealth are transmitted from generation to generation. This isn't true in most first-world countries. The top tax rate in the US isn't nearly as high as many European countries. The specific quantity of money that is collected as tax revenue has much more to do with just how successful the higher classes are in the US as compared to other countries. This is a function of (wealth inequality multiplied by the top tax rate) not of how progressive the system is -- certainly not at the federal level. If you have citations, they are much welcome. The post you're replying to missed many critical factors, such as the fact that the average salary in constant-dollar terms has remained the exact same since 1964 in the US. [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
- ipnon 6y ago
  Consider the inverse: Why has life gotten cheaper?
- tstrimple 6y ago
  Poor people aren't really poor because they almost all have a refrigerator and an iPhone is not as compelling an argument as you may think. There are very real and very extreme examples* of poverty in this country that are inexcusable. * https://www.theguardian.com/us-news/2017/sep/05/hookworm-lowndes-county-alabama-water-waste-treatment-poverty https://www.theguardian.com/us-news/2017/sep/05/hookworm-low...
  - bumby 6y ago
    What do you personally think is a better metric for poverty? Something like access to quality healthcare? https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(18)30994-2/fulltext https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
- adamredwoods 6y ago
  I think we need to define terms. What is poor, what is rich. Are we measuring the delta between rich and poor? Over what time frame? https://ourworldindata.org/a-history-of-global-living-conditions-in-5-charts https://ourworldindata.org/a-history-of-global-living-condit... https://ourworldindata.org/human-development-index https://ourworldindata.org/human-development-index
mythrwy 6y ago
My feeling is "the easy answer" is "All Of The Above" and the bubble choices proceeding encompass a range of reasons from "A" to "ZZZ".
redorb 6y ago
This is a great definition of what I consider to be the 'poor tax'.. Not to mention if they ever get un-poor they don't have the knowledge to 'build wealth' until they start slowly learning it or from a mentor. We would better off teaching 'home finances, interest and banking' classes instead of Algebra 3 or geometry 2 (for 99% of people)
- zouhair 6y ago
  That's the only way to have billionaires. They have to take the money where it is, mostly in poor people's pockets.
  - omilu 6y ago
    Presumably they make things of value to get rich, which is why we enjoy the standard of living we all do.
- dlhavema 6y ago
  Very true
- rjbwork 6y ago
  Define "we". Many a rich man was made by picking a poor man's pocket.
- CarbyAu 6y ago
  Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own things that make money. They are not "rent seekers". They don't own stocks or real estate or anything else where the simple act of ownership makes money.
  - ip26 6y ago
    I'm not a finance guy but I suspect it's axiomatic that you can't keep up with inflation without taking any risk. Like a law of economics.
SilasX 6y ago
If so, turn it into a perpetually profitable self-funding charity that fronts the poor the money to get the cheaper option in return for a cut of the savings. It's probably not possible because there are factors other than what you described.
- Guest42 6y ago
  Are there specific issues that you have with the comment and deeper insights than those described? If so, what are they, and what data do you have to support them?
  - SilasX 6y ago
    Yes, the insight that the comment implies there's an easy source of free money that also lifts everyone out of poverty with little effort. Do you not count that as an insight? Were you aware of that implication before seeing my comment? Is there a reason you need copious data to back up my comment but not the original one?
    - frickinLasers 6y ago
      The OP implies no such thing.
      - charwalker 6y ago
        That was OP being sarcastic and stating no further point other than they don't have one.
      - SilasX 6y ago
        Are we reading the same comment? >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. That directly implies that if they could be lent the $15, they could get the long term cheaper option and save money, even if they had to pay it back plus a high APR.
jollofricepeas 6y ago
Great point. Don’t forget that local government also taxes the poor with predatory fees and fines for minor infractions. - parking tickets - car insurance fines - cash bail Sources: https://www.latimes.com/archives/la-xpm-1996-04-20-me-60640-story.html https://www.latimes.com/archives/la-xpm-1996-04-20-me-60640-... https://theappeal.org/fines-and-fees-explained-bf4e05d188bf/ https://theappeal.org/fines-and-fees-explained-bf4e05d188bf/ https://www.prisonpolicy.org/reports/incomejails.html https://www.prisonpolicy.org/reports/incomejails.html
Balgair 6y ago
Slight aside: Poor people aren't trying to maximize profits. They are trying to minimize risk. It's a small quibble, but it helps explain the different behavior of the wealthy and the poor. More importantly, it explains the mindset that changes with wealth. Bret Devereaux of the acoup blog had a good piece on this in reference to medieval farming estates of lesser nobles and the abject poor [0]: "I led in with all of that risk and vulnerability because without it just about nothing these farmers do makes a lot of sense; once you understand that they are managing risk, everything falls into place. Most modern folks think in terms of profit maximization; we take for granted that we will still be alive tomorrow and instead ask how we can maximize how much money we have then (this is, admittedly, a lot less true for the least fortunate among us). We thus tend to favor efficient systems, even if they are vulnerable. From this perspective, ancient farmers – as we’ll see – look very silly, but this is a trap, albeit one that even some very august ancient scholars have fallen into. These are not irrational, unthinking people; they are poor, not stupid – those are not the same things. But because these households wobble on the edge of disaster continually, that changes the calculus. These small subsistence farmers generally seek to minimize risk, rather than maximize profits. After all, improving yields by 5% doesn’t mean much if everyone starves to death in the third year because of a tail-risk that wasn’t mitigated. Moreover, for most of these farmers, working harder and farming more generally doesn’t offer a route out of the small farming class – these societies typically lack that kind of mobility (and also generally lack the massive wealth-creation potential of industrial power which powers that kind of mobility). Consequently, there is little gain to taking risks and much to lose. So as we’ll see, these farmers generally sacrifice efficiency for greater margins of safety, every time." [0] https://acoup.blog/2020/07/24/collections-bread-how-did-they-make-it-part-i-farmers/ https://acoup.blog/2020/07/24/collections-bread-how-did-they...
- thereticent 6y ago
  Worth noting that much of the markup on smaller quantity retail items and interest for the poor (or even middle class) works because of this mitigation if risk before profit-loss.
- fallingfrog 6y ago
  All this makes sense. I’d also point out though that there’s a societal aspect of this too- rich people have a lot of ways that they use to make sure that when things go badly, it’s poor people who pay the cost. So they have good reasons to worry less about tail risks. For instance: does your local city council respond to rising rents with the same urgency as they respond to falling real estate values? What did America put more money into during the coronavirus crisis, keeping people from being evicted or propping up the stock market? Rich people don’t worry about tail risks because they don’t have to.
econcon 6y ago
>Easy answer: because expenses are higher for poor people As a person who mentors poor people, it's not always this.. Don't get me wrong, there are some poor people who are poor by choice. They usually don't feel like victim and aren't stressed about them being poor. They are pleasant to deal with as they understand the trade off they are making. They are very small % of poor people. Here is the difference I see: 1. Reasonable well off people (many of HN crowds are this) are usually willing to listen and discuss the ways some project or work can be done better. 2. I've gone to offer same suggestions to poor people, a lot of them listen to me absent minded. They complain "I am too tired", "I am losing hope" while a few of them go back to doing drugs and drinking. 3. Poor people don't want to lose their "immediate" freedom. While well off people understand it's a temporary scarifice they are making, later situation will change. 4. Optimism, all the guys who came up with ideas and plans are now doing well. 6. Ability to form relationships and acquire new friends. I consistently saw the poor people who I was mentoring would abuse their friends (without realising), they'd call them "dumb, stupid" while having all evidence like "success, wealth, education qualification" which clearly showed the person giving them advise they are asking for is just trying to help them. 7. Coming from poor household, I used to think rich people are evil and all but I really figured out that a high proportion of rich people were just more attentive and good are forging connections which often continued life long and the benefits compound when you are connected to so many good people for so long this is what most poor people do not realize.
- JAlexoid 6y ago
  You just listed off all the psychological symptoms of long term poverty. Congratulations at being very shallow. It's not the reason why people are poor, it's the result of being poor and being treated as such.
AlexTWithBeard 6y ago
> 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 Get together with your neighbors and buy a 20-pack? > the lower class have to buy their own uniforms or tools. Workers owning their own tools. Isn't it what Karl Marx dreamt of? > Instead of a 5% interest rate on their loan, they have a 25% interest rate. Don't use loans. Seriously. You either can afford something, or you can't. Buying a house is probably the only exception. I know in US culture it sounds almost as crazy as "don't own a car" or "don't watch TV", but that's entirely possible.
deleted 6y ago
[deleted]

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.
  - quercusgrisea 6y ago
    Food insecurity is not specific to communist countries, it's a massive problem in capitalist countries today. The US is the richest country in the world and 37 million people experienced food insecurity in 2018 - https://en.wikipedia.org/wiki/Hunger_in_the_United_States https://en.wikipedia.org/wiki/Hunger_in_the_United_States
    - missedthecue 6y ago
      "Food insecurity" is nowhere near the same thing as going to another city to stand in line for potatoes and onions. On the whole, decentralized distribution is always better than when centrally controlled
      - quercusgrisea 6y ago
        >"Food insecurity" is nowhere near the same thing as going to another city to stand in line for potatoes and onions. What's the difference? Millions of people in the US have to line up at soup kitchens and food banks in order to avoid starvation. >On the whole, decentralized distribution is always better than when centrally controlled That's a strong claim; I'd be interested to look at evidence for it if you have any. One major counterpoint would be the enormous reductions in poverty that China has achieved over the last decades. Quoting from Wikipedia here: >The dramatic progress in reducing poverty over the past three decades in China is well known. According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China's poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms. https://en.wikipedia.org/wiki/Poverty_in_China https://en.wikipedia.org/wiki/Poverty_in_China
- ChrisLomont 6y ago
  >For much the 1900s the top income tax bracket in the US was over 80%, Top tax is not the same as effective tax rate. For example, when Reagan lowered the top brack from 50% to 37% while also closing taxable shelters,the amount the rich paid actually went up. The CBO has all this type of data. >This is a result of social policy. It's more the result of changes in the world economy. Computers have made skilled jobs vastly more productive, while unskilled like making burgers or painting exteriors have not seen anywhere near the gains. And as the rest of the world is catching up quickly to first world quality of life, the advantage the poor in the US had on the world labor supply is much less. >while on average wages have tracked inflation Only for white men in the US (and most first world countries). Poor women and minorities have seen vast gains in income over the past 40 years in the first world. The rest of the world has seen a massive gain for the poor. Remember, the poverty line in the US is about the top 15% of incomes worldwide. Our poor are quite rich by world or historical standards. You used to be able to check this at globalrichlist.com, but it's now down. I suspect you can find this info elsewhere. As some easy evidence to check, poverty line for a household of three in the US is $21k (and that pre-tax transfer. Post transfer is about 40k). Here's per country median incomes. https://worldpopulationreview.com/country-rankings/median-income-by-country https://worldpopulationreview.com/country-rankings/median-in...
  - deleted 6y ago
    [deleted]
  - missedthecue 6y ago
    >Top tax is not the same as effective tax rate. For example, when Reagan lowered the top brack from 50% to 37% while also closing taxable shelters,the amount the rich paid actually went up. This is something a lot of folks miss. The US has the most progressive tax system in the western world. The top brackets pay a much larger percentage than anywhere else.
    - arcticbull 6y ago
      Yeah, no, they don't, and it isn't. Estate tax being practically zero means huge quantities of un-earned wealth are transmitted from generation to generation. This isn't true in most first-world countries. The top tax rate in the US isn't nearly as high as many European countries. The specific quantity of money that is collected as tax revenue has much more to do with just how successful the higher classes are in the US as compared to other countries. This is a function of (wealth inequality multiplied by the top tax rate) not of how progressive the system is -- certainly not at the federal level. If you have citations, they are much welcome. The post you're replying to missed many critical factors, such as the fact that the average salary in constant-dollar terms has remained the exact same since 1964 in the US. [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
ipnon 6y ago
Consider the inverse: Why has life gotten cheaper?
tstrimple 6y ago
Poor people aren't really poor because they almost all have a refrigerator and an iPhone is not as compelling an argument as you may think. There are very real and very extreme examples* of poverty in this country that are inexcusable. * https://www.theguardian.com/us-news/2017/sep/05/hookworm-lowndes-county-alabama-water-waste-treatment-poverty https://www.theguardian.com/us-news/2017/sep/05/hookworm-low...
- bumby 6y ago
  What do you personally think is a better metric for poverty? Something like access to quality healthcare? https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(18)30994-2/fulltext https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
adamredwoods 6y ago
I think we need to define terms. What is poor, what is rich. Are we measuring the delta between rich and poor? Over what time frame? https://ourworldindata.org/a-history-of-global-living-conditions-in-5-charts https://ourworldindata.org/a-history-of-global-living-condit... https://ourworldindata.org/human-development-index https://ourworldindata.org/human-development-index

mythrwy 6y ago

My feeling is "the easy answer" is "All Of The Above" and the bubble choices proceeding encompass a range of reasons from "A" to "ZZZ".

redorb 6y ago

This is a great definition of what I consider to be the 'poor tax'.. Not to mention if they ever get un-poor they don't have the knowledge to 'build wealth' until they start slowly learning it or from a mentor. We would better off teaching 'home finances, interest and banking' classes instead of Algebra 3 or geometry 2 (for 99% of people)

zouhair 6y ago
That's the only way to have billionaires. They have to take the money where it is, mostly in poor people's pockets.
- omilu 6y ago
  Presumably they make things of value to get rich, which is why we enjoy the standard of living we all do.
dlhavema 6y ago
Very true
rjbwork 6y ago
Define "we". Many a rich man was made by picking a poor man's pocket.
CarbyAu 6y ago
Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own things that make money. They are not "rent seekers". They don't own stocks or real estate or anything else where the simple act of ownership makes money.
- ip26 6y ago
  I'm not a finance guy but I suspect it's axiomatic that you can't keep up with inflation without taking any risk. Like a law of economics.

SilasX 6y ago

If so, turn it into a perpetually profitable self-funding charity that fronts the poor the money to get the cheaper option in return for a cut of the savings. It's probably not possible because there are factors other than what you described.

Guest42 6y ago
Are there specific issues that you have with the comment and deeper insights than those described? If so, what are they, and what data do you have to support them?
- SilasX 6y ago
  Yes, the insight that the comment implies there's an easy source of free money that also lifts everyone out of poverty with little effort. Do you not count that as an insight? Were you aware of that implication before seeing my comment? Is there a reason you need copious data to back up my comment but not the original one?
  - frickinLasers 6y ago
    The OP implies no such thing.
    - charwalker 6y ago
      That was OP being sarcastic and stating no further point other than they don't have one.
    - SilasX 6y ago
      Are we reading the same comment? >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. That directly implies that if they could be lent the $15, they could get the long term cheaper option and save money, even if they had to pay it back plus a high APR.

jollofricepeas 6y ago

Great point. Don’t forget that local government also taxes the poor with predatory fees and fines for minor infractions. - parking tickets - car insurance fines - cash bail Sources: https://www.latimes.com/archives/la-xpm-1996-04-20-me-60640-story.html https://www.latimes.com/archives/la-xpm-1996-04-20-me-60640-... https://theappeal.org/fines-and-fees-explained-bf4e05d188bf/ https://theappeal.org/fines-and-fees-explained-bf4e05d188bf/ https://www.prisonpolicy.org/reports/incomejails.html https://www.prisonpolicy.org/reports/incomejails.html

Balgair 6y ago

Slight aside: Poor people aren't trying to maximize profits. They are trying to minimize risk. It's a small quibble, but it helps explain the different behavior of the wealthy and the poor. More importantly, it explains the mindset that changes with wealth. Bret Devereaux of the acoup blog had a good piece on this in reference to medieval farming estates of lesser nobles and the abject poor [0]: "I led in with all of that risk and vulnerability because without it just about nothing these farmers do makes a lot of sense; once you understand that they are managing risk, everything falls into place. Most modern folks think in terms of profit maximization; we take for granted that we will still be alive tomorrow and instead ask how we can maximize how much money we have then (this is, admittedly, a lot less true for the least fortunate among us). We thus tend to favor efficient systems, even if they are vulnerable. From this perspective, ancient farmers – as we’ll see – look very silly, but this is a trap, albeit one that even some very august ancient scholars have fallen into. These are not irrational, unthinking people; they are poor, not stupid – those are not the same things. But because these households wobble on the edge of disaster continually, that changes the calculus. These small subsistence farmers generally seek to minimize risk, rather than maximize profits. After all, improving yields by 5% doesn’t mean much if everyone starves to death in the third year because of a tail-risk that wasn’t mitigated. Moreover, for most of these farmers, working harder and farming more generally doesn’t offer a route out of the small farming class – these societies typically lack that kind of mobility (and also generally lack the massive wealth-creation potential of industrial power which powers that kind of mobility). Consequently, there is little gain to taking risks and much to lose. So as we’ll see, these farmers generally sacrifice efficiency for greater margins of safety, every time." [0] https://acoup.blog/2020/07/24/collections-bread-how-did-they-make-it-part-i-farmers/ https://acoup.blog/2020/07/24/collections-bread-how-did-they...

thereticent 6y ago
Worth noting that much of the markup on smaller quantity retail items and interest for the poor (or even middle class) works because of this mitigation if risk before profit-loss.
fallingfrog 6y ago
All this makes sense. I’d also point out though that there’s a societal aspect of this too- rich people have a lot of ways that they use to make sure that when things go badly, it’s poor people who pay the cost. So they have good reasons to worry less about tail risks. For instance: does your local city council respond to rising rents with the same urgency as they respond to falling real estate values? What did America put more money into during the coronavirus crisis, keeping people from being evicted or propping up the stock market? Rich people don’t worry about tail risks because they don’t have to.

econcon 6y ago

>Easy answer: because expenses are higher for poor people As a person who mentors poor people, it's not always this.. Don't get me wrong, there are some poor people who are poor by choice. They usually don't feel like victim and aren't stressed about them being poor. They are pleasant to deal with as they understand the trade off they are making. They are very small % of poor people. Here is the difference I see: 1. Reasonable well off people (many of HN crowds are this) are usually willing to listen and discuss the ways some project or work can be done better. 2. I've gone to offer same suggestions to poor people, a lot of them listen to me absent minded. They complain "I am too tired", "I am losing hope" while a few of them go back to doing drugs and drinking. 3. Poor people don't want to lose their "immediate" freedom. While well off people understand it's a temporary scarifice they are making, later situation will change. 4. Optimism, all the guys who came up with ideas and plans are now doing well. 6. Ability to form relationships and acquire new friends. I consistently saw the poor people who I was mentoring would abuse their friends (without realising), they'd call them "dumb, stupid" while having all evidence like "success, wealth, education qualification" which clearly showed the person giving them advise they are asking for is just trying to help them. 7. Coming from poor household, I used to think rich people are evil and all but I really figured out that a high proportion of rich people were just more attentive and good are forging connections which often continued life long and the benefits compound when you are connected to so many good people for so long this is what most poor people do not realize.

JAlexoid 6y ago
You just listed off all the psychological symptoms of long term poverty. Congratulations at being very shallow. It's not the reason why people are poor, it's the result of being poor and being treated as such.

AlexTWithBeard 6y ago

> 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 Get together with your neighbors and buy a 20-pack? > the lower class have to buy their own uniforms or tools. Workers owning their own tools. Isn't it what Karl Marx dreamt of? > Instead of a 5% interest rate on their loan, they have a 25% interest rate. Don't use loans. Seriously. You either can afford something, or you can't. Buying a house is probably the only exception. I know in US culture it sounds almost as crazy as "don't own a car" or "don't watch TV", but that's entirely possible.

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