Thursday, July 31, 2014

Structural vs individual poverty theories: A comment


Matt Bruenig has stirred up Noah Smith by laying out why life coaching is a foolish way to address poverty, since most people churn in to and out of poverty during their lives, meaning that most people already achieve what the life coaches are intended to achieve.

He characterises the debate about poverty as falling into two theoretical camps, individual or structural, and presents some data to make the case that poverty is a structural problem, concluding that 
Since the problem is structural, the solution must be structural as well 
Bruenig outlines the two theories as follows.
Theory One: Poverty Is Individual
The right-wing view is that poverty is an individual phenomenon. On this view, people are in poverty because they are lazy, uneducated, ignorant, or otherwise inferior in some manner. If this theory were true, it would follow that impoverished people are basically the same people every year. And if that were true, we could whip poverty by helping that particular 15% of the population to figure things out and climb out of poverty. Thus, a program of heavy paternalistic life contracts to help this discrete underclass get things together might conceivably end or dramatically reduce poverty. 
Theory Two: Poverty Is Structural
The left-wing view is that poverty is a structural phenomenon. On this view, people are in poverty because they find themselves in holes in the economic system that deliver them inadequate income. Because individual lives are dynamic, people don't sit in those holes forever. One year they are in a low-income hole, but the next year they've found a job or gotten a promotion, and aren't anymore. But that hole that they were in last year doesn't go away. Others inevitably find themselves in that hole because it is a persistent defect in the economic structure. It follows from this that impoverished people are not the same people every year. It follows further that the only way to reduce poverty is to alter the economic structure so as to reduce the number of low-income holes in it.
Smith doesn’t like this for some reason. He responds with a bunch of reasons why it bugs him, which I summarise as
  1. The theories are not mutually exclusive and the dividing line is a bit arbitrary (his points 1, 2 and 5) 
  2. We might not care about structural poverty because people can borrow to smooth consumption during periods they are in poverty 
  3. There are measurement issues 
Bruening then responds.

My contribution to this discussion is to offer an analogy that might be useful in both explaining the problem to a broader audience, and narrowing down where the line between the two competing theories lies.

Imagine a highway full of potholes (structural holes on the road of life). At one end of highway people start their lives with certain endowments of vehicles (wealth), certain starting points, either near lots of potholes, or near smooth parts of road (social capital), and certain levels of driver training (education). This is the structure, or the setup of the problem in which individuals then make decisions about how to navigate the highway without falling into a pothole of poverty.

Even if it is technically possible that everybody could get along the highway without falling into potholes (which it may not be), it may require a great deal of effort not only for those with disadvantageous starting points and clunky vehicles, but a great deal of effort for those zooming along the fast lane in their Porsches, who may need to make space, give way, or lend a hand to make it happen for everyone.

Getting people out of potholes is not as simple, as many like to think, as telling the drivers of clunky old VW Beetles to stop hitting potholes. Some are really stuck; many get themselves out only to fall in the next one. No one wants to be a a pothole. 

So the trade-off is this. Either we
  1. just keep yelling at people to drive around potholes, 
  2. rely in passers by to devote resources to getting everyone along the road by digging them out, giving way, towing if needed, 
  3. or we systematically change the structure of the highway by filling in the potholes. 
Taking the last choice allows each individual more freedom to do as they please along the road of life without fear of landing in a pothole.

We might even start the race with more evenly match vehicles, say, through inheritance taxes on those who start life with a Ferrari.

If we change the structure of the road, individual behaviour doesn’t matter in terms of potholes and poverty any more. That's the approach we take to running actual highways. We don't pretend that having a road network full of potholes is fine, because people can make choices to steer around them. But when it comes to poverty such reasoning is all too common.

To borrow from the handbook of Bruenig reasoning, we can think of the possible poverty solutions in terms of individual or structural changes as follows.
  • Changed individual behaviour, no structural change - maybe 
  • No changed individual behaviour, no structural change - no 
  • Changed individual behaviour, structural change - yes 
  • No changed individual behaviour, structural change - Yes 
Looks like only structural change can do the trick. Sure, technically we can say that it is a little bit of both, but that doesn’t help guide any policy solutions. Once you start along the road of blaming the individual, you can justify just about any economic and institutional structure. Why not make it even harder for people to get our of poverty? It is still their choice. There is still technically a set of individual choices they could make to get out of poverty. It’s not helpful.

6 comments:

  1. Cameron, don't be a idiot.

    Your 2 and 3 are the same thing.

    rely in passers by to devote resources to getting everyone along the road by digging them out, giving way, towing if needed,

    or we systematically change the structure of the highway by filling in the potholes.

    this is EXACTLY the same thing.

    So let's get real:

    The guys not in sh*tty cars GET TO DECIDE the system.

    You'd LIKE them (the top 40%+) to do a basic income.

    THEY'd like to see poors individuals work hard to avoid some potholes.

    -----

    The last part your analogy misses is that the more the poor WORK to avoid potholes, the less potholes there are.

    GICYB is the correct answer, just get used to it.

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    Replies
    1. Morgan,

      Your polite and beautifully worded comment is much appreciated.

      It must be a great joy to live in your fantasy world where driving on road full of potholes is exactly the same as driving on the best German autobahn.

      I wish you all the best. Enjoy your afternoon unicorn ride.

      Cameron

      Delete
    2. Relying on passersby to fill in some of the potholes is not the same thing as systematic change. The former is relying on charity.
      The next part your refutation misses is that while you claim the more the poor work to avoid potholes, the less potholes there are, you forget that the poor may not have access to things which are necessary to "work to avoid potholes."

      Delete
  2. The Porche drivers think they derive no benefit from filling in the potholes. Therefore they will not pay to have them fixed.

    However, they cannot admit to this, since it is they who are ultimately responsible for the potholes, and so instead must fault the drivers of the VWs.

    ReplyDelete
  3. "Imagine a highway full of potholes (structural holes on the road of life). At one end of highway people start their lives with certain endowments of vehicles (wealth), certain starting points, either near lots of potholes, or near smooth parts of road (social capital), and certain levels of driver training (education)."

    It's not a bad analogy and it should be useful as an illustration in the Bruenig vs Smith dispute.

    Clever as it is, however, after a point the analogy breaks down and becomes misleading: in this analogy, a driver's fate is determined independently from the other drivers. It's a matter of starting point, vehicle model and make, and driving skills.

    Yet, in real life, the existence of one shining, brand new Bentley may require the existence of one hundred second-hand rickshaws. In other words, there is no Bentley, if there aren't at least one hundred old, shaky rickshaws.

    Not all drivers use the same highway, either: All the money available to fix the potholes was used to fix the exclusive highway the Bentley driver uses. The rickshaws are stuck in a Mumbai backstreet, congested during monsoon.

    Cheers.

    B.L. Zebub

    ReplyDelete
  4. Cameron,
    this example would be better if you had a wonderfully smooth toll road and a parallel road for those who can't afford the toll.

    ReplyDelete