The Boston Globe published an article on Sunday that examines the work of Charles Karelis and his new book,The Persistence of Poverty: Why the Economics of the Well-Off Can’t Help the Poor that rethinks the ways we view the behavior of poor people:
In the community of people dedicated to analyzing poverty, one of the sharpest debates is over why some poor people act in ways that ensure their continued indigence. Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work.
To an economist, this is irrational behavior. It might make sense for a wealthy person to quit his job, or to eschew education or develop a costly drug habit. But a poor person, having little money, would seem to have the strongest incentive to subscribe to the Puritan work ethic, since each dollar earned would be worth more to him than to someone higher on the income scale. Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices. Social liberals have countered by blaming racial prejudice and the crippling conditions of the ghetto for denying the poor any choice in their fate. Neoconservatives have argued that antipoverty programs themselves are to blame for essentially bribing people to stay poor.
In my work as a case manager for homeless people, one of my great frustrations has been that so many of my clients make decisions that seem to act against their own rational (in the economic sense) self-interest. Too often, when offered the choice between the prospect of long-term steady employment or day labor (in which work is never certain, and when work is available, they are charged all kinds of fees for things like check cashing, mandatory lunch (often donated by church groups), and transportation and end up with $40 net after working 12 hours in a day), they pick the job that will pay them daily.
In my view, that kind of day labor is perfect for an addict as even though the job might stink, at the end of the day, the person has enough money in his pocket to buy a burger, a bottle and a rock of crack. For non-addicts, that kind of work never made much sense to me.
Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn’t apply to the poor. When we’re poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.
Have you ever been poor? If you have, you’ll understand this idea. Your economic and other problems lead you into situations where you may not act in an economically rational fashion. Payday loan? Why the hell not? It will help resolve the current crisis and the consequences can be dealt with later. Behind on the bills? Eh, the bills are so overwhelming, that it might make more sense to have a little fun to think about something else. Financial management doesn’t involve planning for the future in this case, but rather finding ways to make things a little bit better.
Poverty and wealth, by this logic, don’t just fall along a continuum the way hot and cold or short and tall do. They are instead fundamentally different experiences, each working on the human psyche in its own way. At some point between the two, people stop thinking in terms of goods and start thinking in terms of problems, and that shift has enormous consequences. Perhaps because economists, by and large, are well-off, he suggests, they’ve failed to see the shift at all.
I think that’s the key. People start thinking in terms of problems and how to alleviate them the best they can. Economic rationality begins to play less of a role than simply working to feel better, and that’s when some of the behaviors that more well-off people can’t understand begin to take shape.
Perhaps I’m a little too amazed at times when a client spends his money in ways that won’t help them end their homelessness.
It’s easy to blame people for their situations, and certainly, we are all responsible for our own actions, but living in poverty can have a profound impact on why people make the choices they do that seem “irrational” to the rest of us.
“The core of the problem has not been self-discipline or a lack of opportunity,” Karelis says. “My argument is that the cause of poverty has been poverty.“
I look forward to reading Karelis’ book.