Monday, September 03, 2012

Japanese poverty: Who's to blame?

Bryan Caplan is a thinker who is famous for his introspection. When he asks a question - "Why do people go to college?", or "Why are poor people poor?", his instinct is to carefully examine his own pre-existing ideas on the topic. Turning his own beliefs over and over, he examines them from every possible angle, mining his brain for insights.

This sounds like I'm making fun of Bryan, but really, introspection is quite a good technique for understanding the world in many cases. It can tell us much about how consciousness and reason work, about what is right and wrong (because morals = opinions), and other interesting topics. And to the degree that we accumulate knowledge incidentally or accidentally, introspection is valuable because it samples the influences we've accidentally aggregated. But, that said, there are questions for which introspection tends not to be of much use. One example is physics. Racking your brain for memories of how balls rolled down hills in your past is just not going to get you as far as actually going and rolling some real balls down some real hills.

I think that one of these questions is the question of why people are poor. Bryan is planning to write a book on this, called "Poverty: Who's To Blame?" Here are some blog posts that summarize Bryan's ideas on the subject: Post 1, Post 2, Post 3, Post 4, and Post 5. Bryan's main thesis about poverty is that the main cause of poverty is irresponsible individual behavior, chiefly:

1. Drug use (including alcoholism)

2. Single and unplanned parenthood

3. Crime

Bryan is not as clear about how he arrived at this conclusion. Was it introspection? It's easy to imagine that someone who has spent most of his life living in a self-described "bubble" might have had very little contact with actual poverty. But if you spend your life avoiding poor people and passively absorbing the thoughts of people like Charles Murray (a Caplan favorite), your ideas about poverty will be 9 parts stereotype to every 1 part fact. Asserting ideas about poverty that were derived from introspection will then lead to a feedback loop, in which conventional wisdom becomes divorced from extant reality.

Now, maybe Bryan has done more than introspection to come up with his thesis that poverty is the result of bad behavior. I'd like to see his data. And note that simply correlating poverty with bad behavior is not sufficient, because it can't distinguish cause from effect. Bad behavior might be a mechanism for coping with the pain of poverty. Or a third variable might cause both poverty and bad behavior.

In any case, what I really want to talk about in this post is Japan. 

Japanese people will often tell you "There is no poverty in Japan," but this is just false. Japan has significant poverty. Professor Koichi Nakano estimates the Japanese poverty rate at 16 percent - lower than, but generally comparable to, the rate in the U.S. If Bryan Caplan's grand thesis is correct, these Japanese people should be poor because they have children out of wedlock, abuse drugs and alcohol, and commit crime.

Here are facts: 1. The rate of single parenthood in Japan is miniscule compared to that in the U.S. 2. The rate of drug abuse in Japan, though higher than in the past, is far lower than in the U.S. 3. Crime rates in Japan are far, far lower than in the U.S. 4. Alcoholism is a problem in Japan; between 0.8 and 4.4 million Japanese people are alcoholics (out of a total population of somewhere over 120 million). 

So of the types of bad behavior listed by Caplan, only alcoholism is comparable between Japan and the U.S. Perhaps Caplan should narrow his focus - perhaps alcoholism is the main cause of poverty.

Or perhaps Caplan is just dead wrong. Perhaps his preconceived notions about poverty, developed in self-imposed isolation from the actual phenomenon, are simply not an accurate guide to extant reality. 

As it happens, I have had a fair bit of contact with the Japanese poor. In general, although they do engage in more bad behavior than other Japanese people, they engage in less bad behavior than middle-class people in America. In general, they work very hard, abstain from drugs, don't have children out of wedlock, and obey the law. Every day they get up, slave away diligently and conscientiously for 8 or 10 hours at a mind-numbing menial job at pittance wages, and every night they return to sleep on the floor of tiny bare rabbit-hutch studio apartments barely larger than my bathroom. They were born well-behaving and hard-working and poor, and they will die well-behaving and hard-working and poor. Every day, even as people like Bryan Caplan inadvertently mock their struggles, the Japanese poor make a mockery of Caplan's prejudices and stereotypes.

If I had never seen the Japanese poor - if my only contact with poverty had been with the American poor, who tend to bully and rob people like myself at alarming rates - then I expect I would find Bryan Caplan's thesis quite reasonable, and even obvious. But that is why, if you want to know what is actually going on in reality, you have to get outside your bubble. 

If we get outside the "blame-the-poor" introspection bubble, we find that income and wealth pretty much follow a Pareto distribution in every country - there are poor people everywhere. Not poor in the absolute sense - American and Japanese poor people generally have food and shelter and warmth - but poor in the relative sense. The real question of "Why does poverty exist?" is the question of "Why do income and wealth follow a Pareto distribution?". Bad behavior is not likely to be the answer.

Update: A commenter kindly pointed out this paper, which gives somewhat recent (year 2000) numbers on inequality and poverty in Japan. Key takeaway facts: 1. In 2000, the Japanese poverty rate without government benefits (the "market poverty rate") was 16.5%, compared to 18% in the U.S. and 18.2% averaged across a sample of rich countries. 2. Income inequality, measured by the Gini coefficient, was the same for the Japanese working-age population (15 to 64) as for the entire population. This provides strong statistical support for my thesis that poverty is not substantially less common in Japan, despite the far lower prevalence of "bad behavior" there. Bryan Caplan would do well to check out the numbers.


  1. This comment has been removed by the author.

  2. Psychology, I think. America is a place where falling from middle class economic status to lower class is very easy and very painful -- more painful than in most other economically developed lands. It's a horrible thing to worry about in other words, and people adapt by refusing to worry about losing their jobs or their health coverage, and by insisting that these misfortunes will never strike them, that bad luck can only affect those miscreants who deserve what happens to them -- alcoholics, compulsive gamblers, fat people, smokers, high school dropouts, drug addicts, single mothers. And really there are so many bad or upsetting habits we all might have that it's seldom impossible to pin a fault on the poor. If Caplan meets a fat, poorly dressed middle aged smoker looking for work as a real estate salesman, I'm sur he can find twenty different why such a slob should not aspire to such a middle status occupation; if he meets a fat, poorly dressed smoker he happens to recognize wandering down the halls of his office building en route to delivering a lecture, he'd say "Good Morning, Dr. Brown" without a second thought.

  3. I have only spent a few days in Japan staying at Asakusa in Tokyo but was surprised the number of homeless men sleeping along the river and in the streets. It wasn't something I expected on such a scale in Japan. At the same time neither was there an indication of associated crime with unsecured bicycles in the streets everywhere, something only a fool would do here in Australia.

  4. Anonymous10:16 PM

    Introspection can be a powerful tool for those who are willing to use it to understand that there are few limits on the ways that any one of us can come a cropper. Or for that matter to understand why others might behave on ways other than the way we ourselves might. We should be able to find within ourselves thought and feelings that are quite at odds with our own acceptable inclinations. Introspection then is the engine of empathy.

    Without that willingness introspection is the engine of narcissism.

    Why drag in Japan instead of simply sending the dolt to coventry.

    Bryan Caplan is famous? Poor us.

  5. Very interesting.

    Given the effects of serious alcoholism, this clearly hurts your earning power, ceterus paribus, but there's a lot more to poverty.

    Japan has a quite different economy, culture, system, and so can have different substantial factors.

    For any ability; intelligence, physical prowess, health, energy, the bottom 10% could be substantially lower than average, and thus even if they work as hard and responsibly, their earning power could be a lot less.

    In the 1950s, if you were reasonably able-bodied and responsible, you could get a job in a union factory making a middle-class wage (or even many non-union factories), even if you weren't the sharpest tool in the shed, and didn't even graduate high school. Or if you were frivolous in your youth and made mistakes, in your 30s, or even 40s, you could recover and get a second chance, responsibly working hard at a union factory making a middle class wage with health insurance. You could have a family.

    But today, second chances are so much harder and rarer. If you make mistakes in your youth, you can't now just decide I'm going to now be hard working and responsible and work a union factory job making a middle class wage. Now you'll likely make a Taco Bell wage, unless you get a college degree, or strong vocational degree. But getting a college degree when you're 28 or 38 now, and were never a good student in high school, and maybe you have children to support, may be very hard? And if you succeed, employers are going to see you got your college degree finally at 32. You're not the safe, energetic, single 22 year old who did everything expected, and got their degree in four years, who the Fortune 500 companies like, and give the $45,000 with lush benefits to start.

    In Japan, from what I've heard, if you didn't study like crazy as a child and score well on the college entrance exams, it's very hard to get a good job after that even if you later decide to study hard and turn it around. Second chances seem very hard in Japan for those who make mistakes as children, or just don't work extremely hard when their just kids.

    1. Well put, not to mention that the bar is constantly being raised. So even today a college degree simply isn't enough - you have to get that degree in the "right" field and the set of "right" fields is becoming narrower and narrower.

  6. Anonymous1:54 AM

    I think the main problem is that the powers-that-be have no clue how to run a post-industrial capitalist economy. When you're a young, poor, developing, exporting country things are simple- you make as much stuff as you can, sell it overseas, and rake in the profits. But eventually that magic formula stops working- telling people to "work harder!" and "produce more!" doesn't work when there's more people than jobs, and you can't even sell the stuff that you've already got. But the elites are all old men who made it big under the old system, and they insist that it will keep working if we just try harder.

  7. WakeUpWhenTheCloudsAreFarBehind2:08 AM

    Bryan Caplan is about 40 years behind the evolutionary psychology literature. Not that I am an expert in it. Far from it.

    But at least some evidence suggests, for example, that what he calls "impulsivity" is an acquired response to volatile environments (i.e. growing up in a dangerous neighborhood) and that teenage pregnancy isn't due to low IQ and "girls forgetting to bring the condoms" but a rational response to environmental stimuli:

    That guy is basically stuck in the 19th century and hasn't even acknowledged any of the hard numbers that make his arguments not just inconsistent with reality but just plain incoherent: his entire ontology is anachronistic.

  8. Anonymous8:39 AM

    Yawn. Henry George figured out the cause of poverty over a hundred years ago. "It's the landlords, stupid."

  9. I don't understand why Bryan Caplan is taken so seriously. He's constantly praised as "brilliant" by the conservative econoblogs; which is a sad indictment of the level of intellect on that side of the spectrum.
    I read Caplan pretty often but rarely does he have anything to say that goes beyond ill-informed opinions and stereotypes. The only sensible idea I've heard from him, that education is mostly signalling, is pretty obvious to anyone outside academia. On the whole, however, he's just a man who has had a very narrow set of life experiences and for some reason thinks he's in a position to lecture the masses on how to live.

  10. Noah: "Bryan Caplan is a thinker who is famous for his introspection. "

    I think that this word doesn't mean what you think that it does :)

    1. JohnR3:33 PM

      Which word, Barry? "Thinker", "famous", or introspection"? Inquiring minds want to know.

    2. I'd say the first and third, at a guess.

  11. Alan Goldhammer1:36 PM

    Several weeks ago this topic was posted on Tyler Cowen's blog and I responded that Caplan would do well to take the summer off and do some real field research. He would take two minimum wage jobs to make ends meet for a family of four, not use his computer or smart phone except on weekends and communte via public transportation. I would let him stay in his house. This way he would really have some first hand knowledge to write a good book on rather than the baked in pre-conceptions from reading too much Charles Murray.

    He might also do well to read the following book: Ignorance: How It Drives Science by Stuart Firestein. I heard Professor Firestein on a radio program yesterday when I was out for my walk and it's a good approach to research (and one that I followed in my own scientific career) as it forces you to do away with the biases that normally are part of thinking. The other book that Caplan would get a lot out of is Thinking Fast and Slow by Danny Kahneman.

  12. Anonymous2:18 PM

    Caplan likes to lie, or at the very least to mislead. His CV states that he's published at the AER. He has a five page co-authored paper at the AER Papers & Proceedings. Any half-decent economist knows that the AER Papers & Proceedings are not peer-reviewed. Not that publishing there is wrong, or that the aricle has more or less merit. Still, any economist knows that saying "published in the AER" is not exactly stating what he did. His CV is misleading.

  13. Caplan is onto something when he discusses the link between poor decisions and poverty. Yes there are rich individuals who make poor choices and vice versa, but it seems obvious that individuals in higher income brackets tend to make more responsible economic decisions because they face incentives that provide greater rewards for such behavior. End of story. My question is why aren't Caplan's arguments (and some of his detractors' arguments, yours included Noah) centered around this?

    1. JohnR3:40 PM

      " seems obvious that individuals in higher income brackets tend to make more responsible economic decisions because they face incentives that provide greater rewards for such behavior."

      I see. Interesting. You know, it also seems obvious that the Sun goes around the Earth. Tell me; if you had, let's say, 2 million dollars/year income, how many "irresponsible economic decisions" could you get away with? Suppose you only had, let's say, $40,000/ year salary instead? What about a salary of $20,000? Did you check your assumptions before you took your syllogismobile out on the road?

    2. What's your point, besides that you missed mine? First of all I'm talking about on average. Second, all I'm saying is individuals across the demographic spectrum face different incentives, which lead to different decisions, some of which produce better results than others...etc.

    3. Ignoring that one of the richest people in the world is Indian. The uncomfortable truth for Caplan would be that his position is an accident, circumstance, and quirk rather than the result of his efforts, and that those were efforts, the result of doing what he really thought was best rather than easy and he really wouldn't have done them if he didn't think it mattered and believed the choice was his.

    4. Rich people are just as likely to make stupid mistakes as poor people, they just have a bigger buffer. If a poor kid tries cocaine, he's going to jail, coming out an ex-con and marked for life. If a rich kid tries cocaine, his family will get him a lawyer, a doctor and a sympathetic judge and he'll get parole, maybe an expensive "treatment" and it vanishes from his record. You can go down the list of dumb things you can do - goof off in school, get pregnant, hang around in pool halls - and a poor kid is much more likely to suffer for it than one with money.

  14. Asking why there are poor is equivalent to asking why there are rich. The poor is what allows the rich to be rich; if we were all the same, we would all end up the same with neither poor nor rich. In Caplan's view this has to be due to decisions and behavior because otherwise they would be the deserving poor and require him to have some sympathy for them. One could as well ask him why he or all of us aren't as wealthy as Bill Gates. What are the poor decisions and behavior he/we made? What is his excuse? He favors open immigration but virtually all those immigrants are poorer and countries from which they come are poorer than us, so what poor decisions and behavior are responsible for that and why should immigration be offered to those undeserving immigrants? Should we require they make better decisions and behave better as evidenced by their wealth before we allow them to immigrate? How do you know anyone is deserving other than they have what they have? Politicians must be very deserving.

  15. A very coherent post ;-)

    But you misrepresent Bryan so wrongly here that I am beginning to wonder whether you are simply pissed that he is one of the smartest bloggers out there.

    In this post here,

    Bryan clearly differentiates between the "deserving" poor and the "undeserving" poor. I mean even a non Princeton non PhD knows that Indian poverty is mainly because of its liberal socialists at the top. India's poor are quite clearly very docile, hard working and well behaved. So I doubt anyone thinks "Behavior" is the "only" reason for poverty in the world.

    But Behavior matters. We all know that. The question is how much of our own behavior can we control and change. How much of our behavior is because of the bad incentives around us. How much of it is simply "cultural" and how much of it is the outcome of initial failures. Those are some of the real issues I believe Bryan is currently researching.

    1. WakeUpWhenTheCloudsAreFarBehind3:29 PM

      I would propose here that differentiating between behavior we can control and behavior that is "caused" by external factors is a false dichotomy.

      I hypothesize that it is false in two dimensions.

      First, I propose that it doesn't exist as a dichotomy in reality. Second, we cannot differentiate between the two no matter how hard we think we are trying to.

      There is no regression you can run or econometric model you can build in which "personally controlled behavior" will be orthogonal to environmentally induced behavior.

      Neither exists independently, hence why I hypothesized above that Caplan's entire philosophy may be ontologically outdated: he is working with categories that don't exist and so it's pointless trying to classify actions and outcomes in such categories.

      "Impulsivity" is an example of this. I don't think Caplan has any real idea what he means by that term. When you act on impulse (i.e. having unprotected sex), no one can say whether and to what extent you are fully in control of the action or that a long and complex set of environmental factors, combined with psychological architectures, hormones, and bilateral personality traits have had a greater, smaller, or equal influence, simply because the two things are not orthogonal to each other.

      Trying to apply a dichotomy to such an act is just not very interesting because it gets you nowhere if you really care about understanding the issue.

      That, at least, is my impression.

    2. This critique is true of all facets of social science. Breaking the behaviors you listed above into a dichotomy is a simplification, yes, but you seem to imply "we can't break apart these factors, therefore any commentary on the subject is meaningless". Either that or your analysis is resting on untestable hypotheses, which doesn't seem to be any better than the reliance on introspection, which leads to false conclusions as well.

    3. WakeUpWhenTheCloudsAreFarBehind4:05 PM

      Not sure why we should be happy with simplifications. What exactly is your justification for that?

      When constraints exist, you make progress by removing them, not by dwelling within them and running in circles.

      It took the creation of a lot of new mathematical tools to make relativity possible, but it was possible indeed.

      By the same process, we just need to develop tools here that don't rely on poor ontologies.

      So I am not sure where you got the idea that commentary is meaningless. Various fields in biology and psychology (and physics too, btw) are doing just fine in developing new tools to study human behavior across life histories, group networks, and adaptive systems without resorting to the Caplan Dichotomy.

    4. WakeUpWhenTheCloudsAreFarBehind4:19 PM

      PS: That's why I said it's a hypothesis. We proceed by proposing new ideas, which may prove wrong of course.

      I, based on the work of others because I myself am not smart enough to do it, propose (not insist) that working without this static dichotomy may be more scientifically effective. Dynamic interactions and adaptive systems may be a better way to understand human behavior with feedback loops, sensitivity to initial conditions, etc. than this rigid classification system.

    5. WakeUpWhenTheCloudsAreFarBehind4:25 PM

      PSS: I think you are making the broad and standard "you non-economists just don't get that simplifications are necessary" critique.

      Thing is, I get that critique very well indeed. But I also get the necessary extension of it: that simplifications are only okay initially. As you proceed and as new tools emerge you must systematically remove them. Otherwise, you have no science.

    6. I agree wholeheartedly, but removing constraints is much more difficult in economics (I think) than many of the other we work within them as best we can. Correct me if I'm wrong, but when you say

      "There is no regression you can run or econometric model you can build in which "personally controlled behavior" will be orthogonal to environmentally induced behavior.",

      you seem to be implying econometrics is mostly useless, and therefore commentary based on these are meaningless, since there is very little independence across factors affecting human behavior in all realms.

    7. PS: my last comment was my reaction to your first rebuttal. I'm not saying you don't get the need for simplifications, I'm just saying they are really hard to get rid of, and they are justified until you do.

    8. WakeUpWhenTheCloudsAreFarBehind5:09 PM

      Indeed, indeed. Simplifications are everywhere and everywhere necessary, and it's slow going relaxing them.

      As for econometrics. I don't think econometrics is useless, actually, it's what I am studying presently so I do think it works well and often.

      I also think it works in this field, as long as you are using the econometric models to make predictions rather than trying to disentangle the effects and the magnitudes of the effects of individual independent variables.

      My admittedly simple point (which you correctly pointed out may apply to many fields of social science) was this: if you try to explain poverty on the basis of some vector of independent variables that proxy for "personal characteristics", those variables will always be correlated with the error term, which, supposedly, contains the environmental factors because the environmental factors dynamically and temporally affect the independent variables and vv (plus the various variables will affect each other strongly). So you just can't find orthogonal vectors for the basis.

      More importantly, you won't find instrumental variables either.

      I hypothesize this because of what (little) I know about the evolutionary psychology literature and the dynamic behavioral systems literature.

      Hence, my hypothesis was that no matter how hard you try, you just won't make the errors (the environmental factors) orthogonal if human personality and the environment form a dynamic system with feedback loops rather than isolated "silos" with independent effects.

      That doesn't mean econometrics is totally irrelevant. You can still use it to make predictions, I think, at least in general cases.

      But that doesn't mean we should give up!

      I just suspect it may be better to work with dynamic system theories to understand these issues, incorporating the feedback loops, evolutionary dynamics, etc.

    9. "I am beginning to wonder whether you are simply pissed that he is one of the smartest bloggers out there."

      Did he pay you? :)

      I don't see how you got that Noah is annoyed that Caplan is 'smart,' assuming he is. The issue is Caplan's complete lack of real world experience, and the fact that he revels in his detachment and privilege.

      Also Noah doesn't misrepresent Caplan. The post clearly has the implication that we are talking about relative - rather than absolute - poverty, and Caplan clearly believes many of those in relative poverty in the developed world are undeserving.

    10. @unlearning

      So you believe a fat lazy American poor (with a TV, car, bigger house) does not deserve his poverty ? Relative to what ? To the million wannabe immigrants (at similar IQ levels etc.) who if given the same opportunity would make sure they will not end up poor ? Relative to those hard working Americans who work more than 40 hours a day even at minimum wage to make sure they are not poor ? Compared to those Americans currently poor who keep fighting the odds with the hope that they will eventually overcome their problems ?

      Well maybe then we all don't deserve what we get. We are then all not responsible for our behavior. We should cut out those words will power, hard work from our dictionaries all together. Maybe it is all destiny and there is nothing really we can do about our future.

      I mean can you not see that your own bias has so overtaken you that you don't see that there is a point here worth researching ? If behavior did not matter at all they should shut down the Psychology departments in all universities right ? Sorry but if any it should be the Economics department where PhDs have a poorer understanding of reality than the average man on the street. I would put them in the Psychology or Math departments.

    11. Kabir - Have you ever read anything by Richard Feynman?

    12. Kabir I don't even know how you got the idea I think we should eliminate the idea of behaviour from my post.

      I'm also not sure why you think I don't sympathise with hard working people who struggle to get by. But I simply don't care that a poor person has a TV - that's just something rich people try to use to make poor people feel bad, when it's them who have too much.

  16. Anonymous3:30 PM

    didnt the stanford marshmallow experiment more or less prove that impulsivity is 1) genetic and 2) a strong predictor of life outcomes

    seems at least plausible that poverty is a consequence of an impulsive personality and not vice versa

    1. Lots of things are plausible...

    2. WakeUpWhenTheCloudsAreFarBehind6:27 PM

      "The Influence of Mortality and Socioeconomic Status on Risk and Delayed Rewards"

      It doesn't seem like there is consensus that impulsivity (or its opposite) is unrelated to environmental factors.

  17. Let me illustrate a little bit of Caplan’s ridiculous bubble. The phrase “rational irrationality” is plastered all over the first part of Derek Parfit’s “Reasons and Persons” (1984). Yet somehow Caplan managed to convince himself he coined the phrase and that his due diligence, when researching for a book, never brought Parfit up. Granted, Parfit is one of the world’s foremost moral philosophers and Caplan only plays one on TV, but still.

    So then he wrote a blog entry* expressing his annoyance at how John Cassidy “stole” his phrase. Because, you know, he believed he coined it. Later in his comments section he learned about some pre-2000 appearances of the phrase, but responds: “… these earlier uses were basically dead ends.”

    Um, no. Reasons and Persons easily falls within the canon of great philosophical works written in the last 100 years. No, its probably not as good not Ayn Rand, but it does mention “rational irrationality” many times and will likely be remembered long after everything Caplan has written is forgotten.

    Due diligence in Caplan’s bubble. Right.


  18. Noah, can you tell us more about poverty in Japan, or direct us towards good sources that can? Having spent considerable time in Japan without interacting with any non-academics, I am very curious.

  19. Almost all societies have poor people who are living well below the standards of their country. If Caplan's thesis is right, we would expect these poor people to "behave" worse than the non-poor people in THEIR country (which, as you say, is exactly what has happened in japan). But whether or not the poor in country X behave worse than poor Americans is not very relevant unless you take the preposterous position that we live in a single, highly integrated, liquid world market where poor japanese compete in a meaningful way with poor americans and poor ugandans etc. More realistically, poor Japanese compete with slightly less poor japanese, and so if a japanese person is poor because of his behavior it will only be because his behavior is worse than his neighbor, not because his behavior is worse than the behavior of a poor American.

    In sum, and to beat a dead horse, if poor people in all countries "behave" systematically worse than richer people in their country this would be evidence (in my opinion pretty good evidence though you would likely dismiss it as barely relevant correlations) that caplan's thesis about the cause of poverty (bad behavior) is right. BTW I think this thesis is surely wrong.

  20. So, would poverty make you mentally ill? They emptied the asylums before you were born.

  21. The "drug" idea is hopelessly small minded. The middle class and rich do more illegal drugs than the poor. See *The New Jim Crow* or many other books. To suggest drug use as a cause of poverty indicates that Caplan hasn't even done the most basic research. Sad.

    1. Anonymous12:39 PM

      Yeah - illegal drugs are an expensive habit, one that takes a substantial sum of money to continue, which is why Wall Street is able to afford so much cocaine.

  22. Anonymous7:52 AM

    Alas, he'd have had a great political career in President Herman Cain's White House....

  23. Am I missing something, or did I sleep through and entire era of economic theory?

    It seems self evident that there are poor people for two reasons:

    1. It's a construct of economic measurement - we draw a line and say "here be poverty" regardless of other factors.

    2. More importantly, society has a vast number of jobs that it wants performed but at a very low wage. This is, for example, the only way to have cheap food.

    Poverty then is an immutable portion of industrial (previously agricultural) civilization. Given that, some people will inevitably sink into it at an equal rate to those who rise out of it. Arguing about the cause of a particular individual's membership in that class is both circular (poverty -> bad behavior -> poverty, ad nauseum) and obfuscatory. We have poor people because we require them; the only real debate is how to minimize the damage.

  24. mojrim,
    you are right that poor people are inevitable but this does not mean that understanding why people are poor is unimportant. In America, some groups stay poor generation after generation. If this is because some groups are naturally stupid, then who cares, nothing can be done and the economy is not being harmed by their persistent poverty. But if these groups stay poor because of 1) unfair policies or 2) correctable (meaning not innate) bad behavior, then the economy is missing out on a lot of talent, and figuring out a way to maximize these people's talent becomes important.

  25. Andrew,
    While what you say is true, I believe it misses the point. While structural changes (e.g. moral instruction, education) can alter who is poor, it can do nothing to alter the number of poor. The idea of "missing out on talent" is just the latest round of economic buzzword bingo; society only requires a relative handful of talented people (whatever that means) to progress, everything else is just gravy for the individual.

  26. Praxeology is — quite literally — idiotic. Introspection tells us nothing about empirical reality. Caplan's methodology is influenced by praxeology. I wish you had gone into this in the post. I don't hold anything against Caplan (if anything, I quite like him) but he won't get to the bottom of the issue of poverty without more observation and less rumination.

    1. I think it's funny that "praxeology" - i.e., "making shit up out of nowhere" - has its own silly made-up name.

    2. Praxeology also has the distinction of echoing the randian technique (or did it influence the randian technique?) of arguing "your denial of praxeology is the very affirmation of it."

      Randians talk that way all the time. Is it a coincidence that Caplan has been influenced by both?

      OTOH, I think Caplan's introspection-as-economics is more influenced by Mike Huemer than anything else. In fact I bet he would even agree.

  27. Nein!

    Ze science of praxeology is not "making shit up out of nowhere!"

    Our science is based on perfecting reasoning from ze fundamental self-evident axioms — such as zat left-wingers and Keynesians are always lying and ze German aristocracy are ze natural rules of ze world.

    If you do not understand zis ve must caution you to read at least 20 more volumes of von Mises until you understand ze fundamental self-evident truth zat he is reasoning from....

    1. Lulz. I didn't know you spoke Old High German, Aziz!

  28. Anonymous9:22 AM

    "I do not pretend to understand the moral universe. The arc is a long one. My eye reaches but little ways. I cannot calculate the curve and complete the figure by experience of sight. I can divine it by conscience. And from what I see I am sure it bends toward justice." Theodore Parker

    I had never heard of the Pareto distribution. When I talked to various people about it, before looking it up, I had some very interesting conversations. One person told me that it meant that 20 percent of the work takes 80 percent of the effort in a project, and that 20 percent of people would generally take up about 80 percent of your time. Someone else told me that she had been instructed by the airline she worked for to concentrate her sales efforts on 20 percentile of their most productive clientele in order to maximize profits for the airline.

    When I looked it up I found that in terms of wealth it showed that in general 20 percent of people held 80 percent of wealth, but that it could be a 70/30 split.

    I've just been looking at the back and forth among the characters of Mr. Wilcox, Miss Margaret Sclegel & Mr. Bass in Howard's End and wondering if people are really better off when they move off the land, although economics says that they are, and they may be. Lots of my relatives did that and would probably say they were, but they still had easy access to the land and water, and some free time and resources to enjoy it.

    Roger Martin of the Rotman School has a new book out about the Canadian economy. He thinks we should concentrate on poverty rather than equality, and that VAT's are better than income taxes. What do you think?

    1. Roger Martin of the Rotman School has a new book out about the Canadian economy. He thinks we should concentrate on poverty rather than equality, and that VAT's are better than income taxes. What do you think?

      1. Concerning poverty vs. inequality, I think we should concentrate on opportunity instead.

      2. I think VATs and income taxes are nearly equivalent, because I think the Frisch elasticity of labor supply is low, but many people, including my advisor, disagree with me about this.

  29. Anonymous9:41 AM

    I should add that the children of the people I know who came off the land and water and into the cities, at a time when there was a big push to address inequality, became physicians and engineers and scientists among other things even though these professions had not been part of their family history until then. So I suspect that if you want to "bend the arc of history" at all you have to strive for more than just addressing poverty.

  30. Anonymous10:14 AM

    Japan's 16% poverty is based on income. I wonder how distorted that is by lots of old people with most of their savings in cash earning nothing. 23% were 65+ in 2011.

    Looking at this wealth Gini coefficient Japan seems to have the lowest inequality in the world and the US one of the highest. Perhaps down to the differences in crime and marriage that you highlight?

    1. But wealth is just lagged income multiplied by a savings rate. Japan used to have very low income inequality, and a high savings rate; hence, of course they now have a low wealth Gini. But now, Japan's income Gini is much higher - not as high as America's, but higher than West Europe - and the household savings rate is lower than America's (it's about zero). So expect to see that wealth Gini go steadily's now close to a mathematical certainty.

    2. Anonymous6:39 PM

      Most of the increase in income Gini is demographic so I doubt life-time individual wealth distribution will change that much. ~50% of the change is from more single person households, ~25% from ageing, see paragraph 20 here:

      Which also shows in table 9 that Japan's higher income poverty is due to having the lowest benefits in the OECD. Market based poverty is lower than the US, which in turn is lower than France/Germany (!)

      So that gives a bit of circumstantial support to Caplan. But the differences in market income poverty are not large, particularly relative to the US, so I think the data mainly supports your basic point that he leaves a lot of Japanese poverty unexplained.

    3. No, I don't think this report gives much circumstantial support to Caplan.

      1. On aging and inequality:

      "the Gini coefficient for the 18 to 65 age group shows the same trend as the coefficient for the entire population" (p. 6 line 2)

      So there goes the idea that "most of the increase in income Gini is demographic". It isn't.

      2. On market poverty:

      Table 9, which you cite, shows Japanese market poverty at 16.5%. Some comparable figures are 18% for America, 16% for Canada, 19.9% for the UK, 20.5% for Germany, 20.5% for Australia, 24.1% for France, and 15.7% for Portugal. The average is 18.2%.

      So Japan has lower poverty than the OECD average, though higher than a few other countries. And the overall rate is close to the average (only 1.5 percentage points away). So I think this strongly backs up my claim that poverty is about as prevalent in Japan as in other rich countries, which is strongly counter to Caplan's thesis, given the far lower rates of most types of "bad behavior" in Japan.

      3. On relative poverty and household size: Yes, much of the increase in Japanese relative poverty was due to young people moving out from multi-generation households. But remember that a lot more Japanese people than Americans still live in multi-generation households! If Japanese young people lived alone to the extent that young Americans do, the Japanese relative poverty rate would be much higher.

      This also supports my argument, and detracts from Caplan's argument.

      Thanks for linking to that paper. It provides strong support for everything I've been saying.

  31. Anonymous11:05 AM

    There always seems to be the suggestion in these discussions that the non-existence of poverty is the normal or expected social outcome, so that if it doesn't happen there must be some kind of pathology present that is interfering with normal functioning. But why should we expect that a society that dispenses income in exchange for work will automatically generate enough employment opportunities to provide everyone in the society with the ability to earn an income that the society itself deems to be at the minimally acceptable level distinguishing the poor from the not-poor?

    Certainly there all all kinds of individual pathologies and problems - including mental illness - which can interfere with the optimal functioning of an otherwise decent system, and can also result in people rapidly losing or dissipating a healthy income that they are receiving. But whether or not everyone in a society has an income that rises above a certain line is a social choice that the society has to make. If the society chooses to organize its economic system in certain ways, with some combination of public and private enterprise, resulting in a particular assortment of jobs, but deems some jobs that are both necessary but poorly valued not to merit the level of income that puts those workers above the poverty line, then looking to individual pathologies is unnecessary.

    1. But why should we expect that a society that dispenses income in exchange for work will automatically generate enough employment opportunities to provide everyone in the society with the ability to earn an income that the society itself deems to be at the minimally acceptable level distinguishing the poor from the not-poor?

      We should not. Poverty is the natural state of humankind. The interesting thing is why non-povery is Pareto distributed.

  32. I assume Murray would argue that what Japan and the U.S. have in common is a wide distribution of IQ. I would add that the same applies to life-style preferences.

    1. 1. Variance is not mean. Think about that.

      2. Murray is well-known to believe in race-IQ correlations, and Japan is far more racially homogeneous than the U.S.

    2. Correct! So to the extend that we define poverty in relative terms, as long as the variance of mental abilities is stable we would expect the distribution of incomes and the fraction of people classified as poor to be stable even when mean income changes. Also, Japan is more racially homogeneous but more heterogeneous in terms of age and with a more rapidly aging population (as someone already noted). Not that I agree with Murray, simply stating that your point does not refute his argument.

    3. Well, there are of course problems with the IQ thing. One is that according to this website, Japan's average IQ is 7 points higher than ours, and yet their per capita income is considerably lower.

      Another problem is that Japan's income Gini is the same for the working-age population as for the whole population, as pointed out in a paper referenced by another commenter.

      Now maybe IQ influences poverty, I can't rule that out, but that wouldn't support Caplan's ideas at all.

    4. But this study

      finds that, and I quote:

      "Population ageing has contributed to higher inequality in market income through three channels. First, the elderly have less income than the working-age population. The increase in the share of elderly
      from 10% of the Japanese population in the mid-1980s to 17% in 2000 raised the level of inequality because of larger between-group income differences. Second, the level of inequality of market income among those over age 65 is higher than for the 18 to 65 age group, reflecting the fact that a smaller portion of the over 65 age group is in the labour force. Indeed, the Gini coefficient for the over 65 age group in Japan in the mid-1980s was 47.3 compared to 30.9 for the working-age population (Table 1). The rising share of elderly in the population thus boosted the level of inequality of market income for the total population. Third, the degree of market income inequality among the elderly in Japan has risen sharply, as shown by the 15.6 percentage-point increase in the Gini coefficient for the over 65 age group since the mid-1980s, moving it toward the OECD average."

      But I agree that Caplan's ideas are not supported regardless of how one looks at them.

    5. But I agree that Caplan's ideas are not supported regardless of how one looks at them.


  33. Wonks Anonymous2:32 PM

    I have a much lower opinion of introspection than you, and think it is one of (perhaps the main) Caplan's greatest sins. But on poverty he does try to cite sociological literature, encouraging those on the right to read left-wing academics (not just Charles Murray!).

    He gave his plans for the book here. Irresponsible behavior is only #3 on the list, but since Japan isn't Third World his first two recipients of blame don't apply.

    On Murray and race/IQ: my recollection is that he has said the portion of the variance in IQ due to between-group variation is so small that eliminating it (giving all groups the same mean IQ) wouldn't reduce total variance much.

    1. But #1 and #2 are about poor countries, not poverty in rich countries. Those are different phenomena and have different definitions as well...

  34. Isn't there a decent amount of literature out there showing that the whole rich/poor thing is extensively decided by luck of the draw? i.e., what class of society you are born into?

  35. I'm from Argentina and living below our poverty line. I have seen manga and anime and japanese movies and was recently wondering how is that there are no poor people shown in japanese stuff. My first thoughts where that there where only a few poor people in japan or that they where too proud to assume poverty. Seem like it's something like that except there are 20 million japanese under the poverty line, that's half of our population (argentinian population duh). It's way too many people.

    The main issue I see is that the focus is set on how middle or high class people live and what they have and that poor people is poor because they don't have access to those things. And things like alcoholism and crime are common amongst rich, middle class and poor people. Seems to me that poor people (really poor people) is something like an excipient of the capitalism structure. And the thing is that the existence of poor people is as serious as the existence of rich people.

    I'm not saying anything new but I think is important not to forget that welfare isn't a solution but more like a morphine-ish palliative that will, sooner or later, erode the middle class and it's never for the best, unless you're rich, but eventually you won't be.

    Japan is one of the countries with the most equal income distribution, one of the top three world economies and since 2000 there has been 700+ deaths of starvation.

    I found your article very interesting and just wanted to participate. Please excuse my bad english.
    Thanks and keep up the good work!

  36. fresno dan7:10 AM

    Interestng discussion.
    1. I would say poor people in America often exhibit bad behavior. What people miss is that this isn't due to being poor, its due to being American. Walk about a European city, and compare the amount of uncivil behavior one will encounter during a typical stroll down an Amercian street. Drivers in America almost go out of their way to harass pedestrians and bicyclists.
    2. I looked at the links about poverty and they really didn't provide much (the link citing Nakano saying estimates contains Nakano's article saying...some estimates).
    I would say if we don't measure benefits we are not going to be able to really address if there is "poverty" is Japan. For example, I assume that essentially everyone in Japan has health care as needed. We may be going that way in the US (ACA), but it still seems that significant numbers of poor in America (deductables, access) do not have access to health care.
    3. Any job where someone will pay you would seem better than unemployment. Japan still seems to have considerably less unemployment than the US.
    4. Bottom line - I would say we do a dis-service to America's poor if we assert that every country has the same amount of "poverty."
    Being poor in Ghana is different and probably worse than being poor in America, but being poor in America is probably worse than being poor in Japan.

  37. Noah - some of the best things I've read about poverty in America recently come from an unusual source - John Cheese at This is one that takes on middle-class moralizing: - but there are several others.

  38. It's the freeways! Think about it: In the 1960s and 1970s cities used freeway construction as a form of urban renewal. This didn't "fix" poverty, it just made it easier for people to avoid it. It bypassed existing businesses and neighborhoods, and -- yes, literally -- paved the way for big-box retailers. Every time the government planned a freeway route, it chose economic winners and losers, and every time it built a freeway through a city, it made the innermost city the loser.

  39. Anonymous1:15 AM

    From my personal experience with the reality of poverty in the US and developing countries, I tend to agree with the idea that poverty in America results in most cases from behavior "defects" and not some other reason like bad luck or lack of resources. I agree that there must be some other macro phenomenon going on probably given the similarity of the conditional income distribution across countries, but still behavior explains most of it. However, the real question is why behavior is so important? If people were randomly endowed with character traits then that's it. There is not much to do. But there is ample evidence of inter-generational persistence of behavior patterns that cannot be explained away purely by genetics. So, what else is going on? I tend to agree with Heckman on this: a lot gets determined by the family environment you are born into.

  40. This is a great post but the libertarian in me asks, first don't you need to stop subsidizing food before you start taxing fat? You say it's time for the government, (and i don't disagree with your 3 suggestions) but shouldn't we first stop subsidizing farmers such that food prices rise to optimal? Also, you speak of food education, currently who writes the latest and greatest, the Big Food industry with connections in the FDA. I just think it's easy to say, we're unhealthy, government make us healthier, but much harder to question why we are unhealthy. I would argue that subsidization of roads, freeways, housing (lead to sprawl), farming, and sugar protectionism against cuba (protecting corn syrup) are more to blame. Hard to always make the argument that more government should correct bad government.