Waylaid Dialectic

January 7, 2014

The Government and Poverty

Filed under: Random Musings — terence @ 8:16 am

Every fool knows the only way to reduce poverty is by letting teh marketz rul right?

A new NBER working paper:

Using data from the Consumer Expenditure Survey and the March Current Population Survey, we calculate historical poverty estimates based on the new Supplemental Poverty Measure (SPM) from 1967 to 2012. During this period, poverty as officially measured has stagnated. However, the official poverty measure (OPM) does not account for the effect of near-cash transfers on the financial resources available to families, an important omission since such transfers have become an increasingly important part of government anti-poverty policy. Applying the SPM, which does count such transfers, we find that historical trends in poverty have been more favorable than the OPM suggests and that government policies have played an important and growing role in reducing poverty — a role that is not evident when the OPM is used to assess poverty. We also find that government programs have played a particularly important role in alleviating child poverty and deep poverty, especially during economic downturns.

And, via Mike Konczal, a study on the impact of the minimum wage in the US on poverty:

I use data from the March Current Population Survey between 1990 and 2012 to evaluate the effect of minimum wages on the distribution of family incomes for non-elderly individuals. I find robust evidence that higher minimum wages moderately reduce the share of individuals with incomes below 50, 75 and 100 percent of the federal poverty line…I also provide a quantitative summary of the literature, bringing together nearly all existing elasticities of the poverty rate with respect to minimum wages from 12 different papers. The range of the estimates in this paper is broadly consistent with most existing evidence,…

March 16, 2013

No Poverty In the USA? You have to be kidding

Filed under: Random Musings — terence @ 7:27 pm
Tags: ,

Lee, at the always excellent Roving Bandit Blog, ponders — is there really poverty in the USA? He provides some stats (contested in comments below his post) suggesting that poverty in the US is no where near as acute as it is in most developing countries.

I think it is fair to say that deprivation for most of those living under the poverty line in the US is not as acute as that experienced by those living in least developed countries. But I find it very hard to see why this means there is no poverty in the States.

If we define poverty as material deprivation causing suffering, poverty clearly exists in the US and should be called that. The fact that it is more acute in Afghanistan doesn’t make the suffering of the poor in the US any less, it simply means that poverty in Afghanistan is more severe. Just because 39C is hotter than 38C doesn’t mean that the lower temperature isn’t still a fever.

If find it really hard to see how anyone could see this any other way.

Lee also, particularly in comments, seems to suggest that it is unethical to fund anti-poverty work in the US when the money could be used to help those worse off in other countries. This is also confused, I think. It’s only even an ethical dilemma if you concede the case on the third part of the trade-off triangle: raising taxes. Were the US to raise taxes it to Scandanavian levels it could both take care of its domestic poor and give a lot more aid. You can claim that this will never happen, but taxes in the US were, in fact, a lot higher pre-Regan. And there is no reason why that isn’t the first thing we should be campaigning for here.

What is more, even if there is a trade off it doesn’t necessarily follow that the funds should flow overseas. Before you can say that you need to know how well they will work. I’m in favour of aid, and want to see more of it given, but even I concede that aid is sufficiently prone to failure that we should at least factor that calculation into our estimates of the most just way of allocating poverty alleviating spending across countries including our own.


July 9, 2010

Link Friday

Filed under: Aid,Governance,Institutions,Social Justice,Trade — terence @ 12:13 pm
Tags: , ,

Starting with industrial policy…

At VoxEU Ann Harrison and Andres Rodriguez-Clare make the case for “soft industrial policy”…

…whose goal is to develop a process whereby government, industry, and cluster-level private organisations can collaborate on interventions that can directly increase productivity. The idea is to shift the attention from interventions that distort prices to interventions that deal directly with the coordination problems that keep productivity low in existing or raising sectors. Thus, instead of tariffs, export subsidies, and tax breaks for foreign corporations, we think of programmes and grants to help particular clusters by increasing the supply of skilled workers, encouraging technology adoption, and improving regulation and infrastructure. While “hard” industrial policy is easier to implement than “soft” industrial policy measures, tariffs and subsidies become entrenched and are more easily subject to manipulation by interest groups.

The article is an excellent overview of the industrial policy debate, and their suggestion certainly has appeal. As always though, I’m still not confident that what they’re arguing for could really work in the institutional environment of developing countries, or that it would be any less subject to manipulation by interest groups than traditional industrial policy. Still, well worth a read.

Meanwhile, industrial policy is now on the menu at the World Bank, courtesy of their interesting new chief economist Justin Lin. And at Poverty to Power Duncan Green reviews some of Lin’s suggestions for industrial policy, offering similar concerns about feasibility in less than optimal institutional environments. To which Lin offers a thoughtful response.

Sticking with Oxfam, Oxfam New Zealand, spurred by last year’s Ministerially mandated change of focus to New Zealand’s aid programme (the core focus now being on economic development), have produced a really interesting piece of research [pdf] on what might work in terms of aid for economic development in the Pacific.

Also on the subject of aid, Owen makes an uncharacteristic error in attributing an incorrect figure to William Easterly. And yet the underlying point of his post is correct and bares repeating. The West really, really hasn’t given that much aid to developing countries:

The G-20 countries have, over the whole history of aid, given less aid to sub-Saharan Africa than they spent on fiscal stimulus in the single year of 2009.

Keeping the segues flowing, William Easterly is at least 50 percent correct in his most recent post at AidWatch:

Here’s why direct solutions to problems cannot foster development. Each direct solution depends on lots of other complementary factors, so the solutions can seldom be generalized across different settings; Solutions must fit each local context. Solutions that generate the highest payoff in each setting should be a higher priority than the lowest payoff solutions. Since there is little or no feedback on how well each solution is working in each local situation, there is little possibility for any such adjustments.

Hear, hear.

Where his post falls apart is in it’s extolling of markets and democracy as the best possible means of finding solutions to the complexities of context. The invisible hand is a miraculous allocational tool, and functioning markets have a critical role to play in enhancing human welfare. But markets are embedded in institutions and when institutions are poor markets are often absent or have perverse outcomes. And in most developing countries institutions are poor. Similarly, democracy is an incredibly good thing. And it’s certainly the least worst means of governance that humans have developed. But in countries where the nation state sits awkwardly against identity and informal institutions, democracy struggles. It’s not a panacea.

Which isn’t to say that economic markets or democratic polities are bad things, even in the most troubled developing countries, but rather that they aren’t the sole answer to the curly problems of aid and development. They’re only part of the answer: compliments to good aid and hard work in determining what works in governance; not alternatives.

Finally (and by now I’m all out of segues) Johann Hari attributes the commodity price crisis, not to rising demand in China, not to supply shocks, not even to ethanol, but rather to investment banks working the futures market. Is he correct? I don’t know. If he is, he’s certainly right about one thing: morally, if not legally, that’s an incredible crime.

May 26, 2010

Nicholas Kristof will always be with us

Filed under: Poverty — terence @ 7:45 am
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In the NY Times Nicholas Kristof points out the obvious (that poor people make bad decisions like everyone else), appears to confuse cause and effect, and skirts close to the cretinous (implying that bad decisions explain global poverty). In doing so he arouses the ire of at least two blogs and elicits a thoughtful contribution from William Easterly.

I’m too hungover to think clearly at present (poker with the lads last night)* but I just want to point out that this story is as gendered as everything else in development.


Because there’s mounting evidence that mothers are more likely than fathers to spend money educating their kids, one solution is to give women more control over purse strings and more legal title to assets. Some aid groups and U.N. agencies are working on that.

*This is a lie. My health prevents me from drinking. But I certainly did plenty of it in the past without suffering poverty as a result. The reason for that? I’m well educated, live in a developed country and come from a relatively well-off family.

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