Poor Thinking

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I wanted to say something about a very silly New Yorker piece by John Cassidy arguing that we should switch from our current method for measuring poverty (as a multiple of a household's minimum food budget, which for all its problems, keeps the idea tied to how well off people are in absolute material terms) to a relative scale that counts the "poor" as all those making less than half the median income. Fortunately, Will Wilkinson has a long post saying pretty much everything I'd wanted to and then some, so I can make this (ahem) relatively quick.

The obvious problem with the proposal is that even if you buy Cassidy's arguments for why relative position in the income distribution is important to people's well being in various ways, his proposal massively overcorrects by making it so that absolute income doesn't matter at all. On this methodology, if the income of every household in America quintupled overnight (in real terms, not just dollar terms), the poverty rate wouldn't budge at all. That's got to be wrong. Cassidy semi-anticipates this objection, and points out that the poverty rate can drop if the society's income distribution becomes more equal. But even that's not really true. Imagine the middle class gradually becomes miserably poor (in archaic absolute terms) while the top ten percent of the population becomes fantastically wealthy, leaving a sharp divide beween the Apollonian few and the Morlock many. That is, intuitively, a profoundly unequal society. But on Cassidy's methodology, the poverty rate might dwindle to almost nothing, provided the Morlocks were fairly uniformly immiserated.

Another odd thing about this is that Cassidy notes that it's problematic to calculate an "absolute" poverty line for a whole country: An income that leaves you at least somewhat comfortable in some rural town might not even cover rent in, say Manhattan—whether you're poor is going to be at least in part a function of what things cost locally relative to your income. But the same's going to be true when it comes to how people's comparison class affects their own subjective sense of poverty. Someone in that same rural town might feel poor if you dropped them on the Upper West Side, but not regard themselves that way at home. But at least with the absolute scale, you can measure local costs and try to adjust. How do you figure out what people's subjective comparison class for poverty or affluence is? And, incidentally, does this mean people in the developing world become poorer when they get access to global media and start comparing themselves to the rich West?

NEXT: Wave That Flag, Wave It Wide and High

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  1. I feel (relatively) poor. The government should buy me a BMW, no? That will help much.

  2. My Dad taught me an invaluable lesson once when I mentioned I didn’t like being poor.
    He said, “Son, Being poor is a mindset. We might be broke at the moment(without money), but we are NEVER poor.”

  3. Putting people in boxes is a messy business, no?

  4. I though US definition poverty, as opposed to actual poor country poverty, was defined decades ago in terms of food, clothing and shelter. Then they simply updated it for inflation. I could be quite wrong in any of several respects there.

    I also am pretty sure that there are several economists who think the current method of US definition poverty is misleading. For one thing, there are huge regional differences in housing costs, so for example the ratio of poverty in Massachusetts to Texas is almost certainly a lot higher than the governments lame stats would lead you to believe.

    Another thing at least some economists would like to see is the government measuring all income sources for purposes of poverty definition, instead of taxable income. This would include welfare payments, food stamps, free or subsidized housing etc. This would tend to mitigate against mindless hysteria as well as point out situations where genuine need exist.

    If you want to see how our (US) poverty rate has essentially gone nowhere since 1973, check out the following link.

    http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

    Looking closely, you can see the 1973 effect, as well as how recessions truly suck for people at the margins of society, as well as how there has been a lot of progress on reducing black poverty rate, albeit much slower than anyone would like, as well as the effect of Hispanics, which have royally offset the black progress in the overall numbers. Non-Hispanic White progress is zero since 1973.

  5. wouldn’t****

  6. “I though US definition poverty, as opposed to actual poor country poverty, was defined decades ago in terms of food, clothing and shelter.”

    Right, as I say in the post above and as the author outlines in somewhat more detail in the article. He’s proposing a change in that methodology.

  7. This coming from the same crowd who’d be likely to say that selling marijuana wouldn’t be an “honest” living.
    What?? Of course selling marijuana is an honest living, it just so happens to be illegal in this country. Of course, legalize it and the profit margin drops like a rock so “living” is subjective.

  8. Right, as I say in the post above and as the author outlines in somewhat more detail in the article. He’s proposing a change in that methodology.

    Comment by: Julian Sanchez at April 3, 2006 08:55 PM

    Actually, you said: >i>arguing that we should switch from our current method for measuring poverty (as a multiple of a household’s minimum food budget, which for all its problems, keeps the idea tied to well off people are in absolute material terms)

    However, it seems like you just left off the clothing and food part. That’s ok, we both agree this guy is just very silly. Sounds to me like he needs to read last month’s Cato Unbound and the accompanying replies. I haven’t gotten to this month yet though. On my now I guess….

  9. On my way now….

  10. As it happens, I just read this article this morning. I didn’t read it the same way you did, Julian. The way I read it, he didn’t actually “propose” anything, but simply pointed out a few ways in which our current method for measuring poverty is problematic (including regional differences and interesting research showing that people’s sense of “poverty” is extremely subjective and relative).

    If you asked me to summarize what the author thinks we should do about this, I’d have to say “study it more.”

    Of course, I’d agree that changing the poverty line to something like “half the median income,” one possibility he mentioned, is on-its-face silly. But the article overall was quite interesting.

  11. This coming from the same crowd who’d be likely to say that selling marijuana wouldn’t be an “honest” living.
    What?? Of course selling marijuana is an honest living, it just so happens to be illegal in this country.

    Illegal is not the same as dishonest! Which brings to mind this paraphrase of Thoreau (The author, not the physicist):
    Under a government which imprisons any dishonestly, the true place for an honest man is also a prison.

  12. The conservative case against a relative-poverty line asserts that since some people will always earn less than others the relative-poverty rate will never go down. Fortunately, this isn?t necessarily true. If incomes were distributed more equally, fewer families would earn less than half the median income.

    This is so shockingly obviously wrong that I can’t believe an editor didn’t catch it. Unless this greater equality means that a significant percentage of families are earning precisely the median wage, this is just clearly not true. How can a person be so mind-numbingly stupid as to write this and how can I be expected to take their opinions seriously?

    This is stupidity so blatant, it should be a firing offense for both the author and the editor.

  13. Fuck. That’s not right. I missed the word “half” in there. Never mind. But the article is still stupid.

  14. PJ O’Rourke somewhere says that as a child he never knew that they were poor. He just thought they were broke.

  15. But honestly, would a little more interdependence lessen worries for us all? We’re all citizens of America- we should treat one another like it, instead of devoting our lives to sapping as much money possible out of gullible consumers.

    How many more people are going to have to die before somebody does something about this?

    Oh wait, that’s what Quincy used to say, isn’t it. Never mind.

  16. Maybe wealth distribution is a mo5re important economic metric than what we think of as poverty.

  17. Poverty in the US = TV that’s 27″ or smaller.

    Cry me a river.

  18. And, incidentally, does this mean people in the developing world become poorer when they get access to global media and start comparing themselves to the rich West?

    Laugh if you like, but look at the decline in population throughout rural America. Without TV, people who grew up in small towns like mine might not have felt the draw to the big city. They felt poorer in the country, moved out, and got a better paying job in the city.

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