Holey poverty, Batman!

One interesting ramification of the Paul Ryan poverty plan is that you see liberals attacking the notion that social workers can help people out of poverty. In days gone by, this was the sort of thing conservatives did, but it's a strange world we live in.

Matt Bruenig, writing for the website Demos, has an interesting blog post attacking the idea that paternalism can reduce poverty. His argument is that because poverty is "structural," changing people's behavior won't reduce poverty rates. Bruenig explains the "structural" theory of poverty thus:

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... 

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.

I myself have often wondered about topics like this. Personally, I heavily doubt that paternalistic behavioral interventions could eliminate most poverty. But still, I have some problems with Bruenig's analysis. Here are my issues, in no particular order:

1. Note that Bruenig's two explanations are not mutually exclusive. It could be part one and part the other. For example, take cancer risk. Cancer risk has a well-known behavioral component - if you smoke, you're much more likely to get cancer. Cancer also has a well-known "structural" component - if you live near a toxic waste dump, you're more likely to get cancer. Cancer also has a random component, which is a theory of poverty that Bruenig did not mention. All of these stories about cancer risk are simultaneously true.

Bruenig, in his blog post, claims to demonstrate some structural reasons for poverty. Assuming that he succeeds in demonstrating this, why does that mean that individual behavior does not factor in poverty at all? That would be like saying that because toxic waste dumps cause cancer, that smoking does not. Which would make no sense. Bruenig does not show that "structural" factors quantitatively explain all of poverty. The particular "structural" factor he discusses - namely, life-cycle effects - explains at most a fraction of poverty. What about the rest? 

2. Next, there's the question of how to differentiate "structural" factors from "individual" behavior on a mass scale. Suppose everyone, acting independently and on their own, just stopped doing any sort of work. The entire world would instantly fall into poverty. But would that poverty be "structural" or "individual"? Note that if you're the one person who wants to work in a society of people who do no work at all, you're not going to be very productive, because you can't specialize. So in the case where no one works, no individual's behavior can hoist him or her out of poverty. So that's "structural", right? But if you simultaneously persuaded a large fraction of people to work, then large numbers of people would climb out of poverty. So is the poverty "individual"? To be honest, I'm not sure, since I don't think Bruenig has defined the terms as generally as he might have.

This is a technical/philosophical issue, but it's an illustration of how the distinction between "structural" and "behavioral" poverty can get very slippery in these discussions.

3. It occurs to me that if poverty is entirely "structural," then depending on who gets assigned to the poverty "holes", we might not care about poverty at all! For example, suppose that income depends only on age - for some reason, you make less when you're young, more when you're middle-aged, and less when you're old, but everyone who is the same age makes the same amount. In other words, suppose that the structural factor identified by Bruenig were 100% of the poverty story. In that case, we wouldn't really care about poverty, since people could just borrow when they're young, save when they're middle-aged, and then consume their savings when they're old, thus smoothing their consumption over their lifetime. Income inequality might be high, but consumption inequality would be low, and everyone would have plenty to eat at all times. So no biggie.

Or alternatively, suppose that income is completely random, but changes at a high frequency? Suppose that everyone is assigned to a random spot on the (fixed, structural) income distribution every year, but that your income one year doesn't affect your chances next year. In this case, people could just buy insurance from each other, and this would solve almost all of the entire problem, since people could then smooth their consumption over the years. Consumption inequality across the broad economy would be very low, and everyone would have plenty to eat. Again, no biggie.

So just showing that poverty is "structural" doesn't imply that we need government to plug the poverty "holes". In fact, it might imply the opposite. Bruenig's post sort of seems to suggest that poverty just a temporary phase of life, in which we all do our time and then escape. I think there's clear evidence that that's not the case, but if it were, it would seriously undermine liberals' case that poverty in America is a big problem.

In other words, I worry that Bruenig, in his zeal to strike down Paul Ryan's paternalistic ideas, might throw out the entire case for poverty reduction in the first place. 

4. Bruenig draws a general inference about the "structural-ness" of poverty that I believe is invalid. He asserts that since the set of poor people is always changing, and since individual behavior is fixed, poverty cannot be due to individual behavior. But the poverty line is just an arbitrary line. A family of 4 making $18,000 $24,000 in 2014 is not "poor" by the U.S. government's definition, but that sure doesn't sound like a lot of money. If random shocks (unemployment, health issues, family issues, etc.) push a bunch of people back and forth over this line, that will show up as a change in the set of poor people each year, but it won't necessarily make a difference in who is materially deprived.

When you ignore the line and look at the more general picture, you see that persistent, long-term inequality has increased in America. That is worrisome. The trend might be due to "structural" changes, and it might be due to large-scale changes in individual behavior. So although personally I predict that "structural" changes - especially globalization - have played a much bigger role than behavioral changes (i.e. family breakdown among uneducated Americans) in the recent increase in poverty, this cannot be proven just by observing that many people cross over the poverty line each year.

5. Bruenig also draws an inference about age and poverty that I believe is invalid. He notes that younger workers consistently get paid less than older ones, and assumes that this is a structural reason, unrelated to individual behavior. But what if workers simply learn as they work, increasing their productivity with experience? And suppose there were some interventions the government could do, early on, to give workers a skills boost before they even started? That paternalistic modification of individual behavior (on a mass scale) would compress the age-based income distribution, and allow young workers to get a head start.

We might even call such an intervention "public school."

In conclusion: I think Bruenig's heart is in the right place, and he raises some important issues. I agree partially with his conclusion (that behavioral interventions won't eliminate poverty), but not entirely (because I suspect they could do some real good, based on the example of public schools). And I think the evidence about "structural" vs. "individual" explanations is not so easily assessed as Bruenig asserts. It's not an open-and-shut case.


Updates

Bruenig responds at his blog. A couple points:

[Quantifying the structural causes of poverty] isn’t difficult for someone who is good with numbers, like Smith is. You can track certain categories like age (which nobody has control over) and see the same patterns year after year and country after country. Young adulthood, childhood, and old age show persistent market poverty spikes in every year and every country. Disability is the same way. Unemployment is the same as well, but people want to quibble over whether this is voluntary sometimes for whatever reason.

Actually, being good with numbers (actually I have software for that, but I appreciate the compliment) doesn't help one identify all the possible "structural" causes of poverty. Age won't account for all of poverty, as Bruenig's own graphs demonstrate. Observe:



As you can see from the y-axis, age doesn't explain the whole thing. (This is one of those graphs where the x-intercept is not set at zero.) Actually, this graph represents an upper bound on the amount of poverty that structural age-related factors can explain, since age may also be correlated with individual behavioral choices; when I was 23, I recall being distinctly interested in partying and trying new...experiences, and distinctly uninterested in doing any more work than I had to do in order to get by...

Unemployment is a biggie, and Bruenig is right that it's not clear how much is structural and how much is behavior-related. As in all these cases, the two can be intertwined (consider the case of youthful choices that screw you over later in life). But even without unemployment, there are a lot of people who just don't make much money, ever - whether or not they're above the official "poverty line". The paper I cited above on "persistent inequality" shows that pretty clearly.

Later, Bruenig catches a mistake of mine:

[$18,000] is actually [below the poverty line]. Well below the poverty line for a family of four, in fact.

Quite true; I was looking at the wrong number. The poverty line is $23,850 for a family of four in 2014. I have updated this in my post above. But the general point I was making is just as valid - you don't have to be below the poverty line to experience material deprivation.

More substantively, here's Bruenig talking about income fluctuations:

We care about poverty because having very little income is hard on you in the episodes where that is the case. It literally scrambles young children’s brains, for instance, fucking them up for the rest of their lives. One in four children in this country are born into it, and this is attributable to the structural problems families have in market systems (including that adding a child increases income needs but the market does not respond and that people make the least amount of money right at the same time they have kids). The existence of structural child poverty is not excused because, when children get to be middle-aged adults, they generally are not in poverty. You don’t eat food across the life-course. You eat it every day.

I think there's a problem here. It's not very little income that's hard on you, it's very little consumption. To understand the difference with a couple of examples, observe that A) many comfortably retired people have low income, but consume the principal of their retirement savings, and B) many children of rich families have zero income, but consume what their parents give them.

The more general point is that, theoretically, you can borrow to smooth consumption. In lean years, borrow money. In good years, save money. Then income fluctuations will not bother you much, and you will eat plenty of food every day! Of course in the real world, there are limits to how much you can borrow, how much you can save, and how much you can predict your future income - but economists find that "consumption smoothing", though not universal, is still very widespread across the economy.

So my main problem with Bruenig's argument is still that he seems to equate structural poverty with transitory poverty. Transitory poverty is not a big deal, because people can smooth their consumption. Intuitively, most liberals realize this - we worry about the poor people for whom poverty is not just a short-lived phase. We worry about the people who are mired in poverty. We don't worry about the entry-level worker who is just starting to climb the ladder. We don't worry about the well-off elderly couple who are spending their nest egg. If government poverty statistics call these people "poor", that's a problem with the government statistics, not with the structure of society. The people we want to help are the people who never (or almost never) manage to get ahead. I think Bruenig, in his zeal to demonstrate his idea, is in danger of forgetting that.