Relative poverty?

Lane Kenworthy takes exception to Paul Krugman‘s use of relative poverty rates to compare countries. The idea is that every country has a different level of income below which they classify a family as poor. Ken says one such relative measure of poverty is counting the number of people that earn less than half of the median income. Because the U.S. has higher incomes than most every other country, this definition would classify many more people as poor.

His post explains that by using absolute measures of income (like saying anyone that makes the equivalent of less than $x), the U.S. turns out to be about in the middle of the pack in terms of the number of poor people. He ends the post with this comment:

This is not to suggest that we should be satisfied with our absolute poverty ranking. Given our nation’s economic wealth, incomes for Americans at the low end of the distribution are far lower than they could be.

So he thinks we should care about the relative poverty measure, just that we shouldn’t use it to compare the U.S. against other countries.

Per my discussion the other day, I’m not sure why we should care about a measure of poverty that relies on comparing incomes. We can all agree that in terms of material outcomes, today’s American poor are an order of magnitude better off than the poor just a few generations ago and they’re several orders of magnitude better off then some poor souls living today continents away. To the extent that poverty is relative to the culture and norms of the day and place, the poor see themselves as poor (or the rest of us see them as poor) by comparing themselves to some culturally determined standard. The rich may not be the standard barer. Thus, defining “the poor” as contrasted to “the rich” may be missing the point.

Even if we define poverty in terms of health care (or health outcomes), labor hours, education attainment, or whatever, its worth pointing out that we’re doing so without reference to the behaviors of the rich. I just don’t see why a relative measure of poverty based on income inequality matters for what we really care about.

Beyond description

For the first two years of grad school, I TA’d in the Anthropology department for a professor that taught Japanese culture. While I had always been interested in Japan — my original plan in grad school was to study Japanese economic history — I was literally a day’s reading ahead of my students.

Anyway, the readings would drive me nuts. Each book opens with a preface or introduction talking about how important it is to study such and such minority group; that to truly understand Japan, we need to be able to empathize with the Monks on Mt. Haguro or whatever. It took me three or four books to realize that the authors wouldn’t actually support this claim in any way. Instead the book would be 200-300 pages of pure description with an off the cuff comment about the dominant culture or American cultural hegemony thrown in.

Bothered by this, I went to the professor and asked her about normative Anthropology. I introduced the topic by asking something like, “On what basis do Anthropologist compare one culture or sub-culture against another? How do they know that minority cultures are in some way better than dominate cultures?”

I don’t remember her exact reply, but it was something like, “there is no normative Anthropology, there’s only description.” This seemed implausible given the tone of the readings for the course, but I let it pass. Every discipline has its delusions (*ahem* rationality *ahem*); who am I to burst Anthropology’s bubble.

Well, gnxp, who often criticizes Anthropology, out of love I’m sure, says there is no positive Anthropology either. Actually, I would say, there are theories in Anthropology, they’re just not written down. They swim around in Anthropologists heads, refracting observations into descriptions.

UPDATE: Just remembered this critique of Japanese Anthropology I wrote up a couple years ago.

What is poverty?

Brad DeLong:

So were workers in London in 1740 as miserably poor as workers in Milan, Leipzig, and Beijing, spending most if not all on their income on bare caloric maintenance in the form of the grain typical of their time and place? Or were the workers of London relatively rich–and deciding to spend their relative wealth on the superior taste and mouth feel of yeasty wheat bread rather than leaden oatcakes and on the associated symbolic declaration that they were proud and free Englishmen, not benighted barbarous Scots (or horses)?

What is the “consumption” we tend to find in our utility functions?

Did you notice Prof. DeLong didn’t ask, “Were the London workers poor because they felt compelled to eat like rich people (and that costs more)?”

Even if you believe consumption is defined relative to ones culture it does NOT follow that income inequality matters. Perhaps the rich set the cultural norm of eating wheat bread, but its just as likely that norm was formed and maintained in the lower income classes.

This is why I didn’t like Frank’s Falling Behind. In the preface, he explicitly says envy isn’t what’s driving people’s natural tendency to compare their lot with their neighbors. He says its culture and the subjectiveness of consumption that matters. He brings up the example of the preference for high quality cars. What’s considered high quality today (GPS, leather seats, whatever) is very different from the what was considered high quality in the past. Its likely, though, that buyers of high quality cars today are no more happy with their purchase than buyers of high quality cars a few decades ago. Cars have gotten objectively better, but subjectively they’re still the same “high quality”.

These are excellent points and its a great example. There is definitely a cultural element to consumption and certainly overall happiness, however measured, isn’t tracking with the vast improvements in quality we’ve seen over the years. Frank, though, spends all of the book talking about income inequality as if the consumption patterns of the rich automatically translate into these cultural factors. He says envy of the rich doesn’t matter, but that’s what he ends up dwelling on.

In Frank’s eyes, the wheat bread norm hurt the lower classes. This is debatable (who would want to think themselves a Scot!), but even giving him that, measuring income inequality wouldn’t tell you anything about that norm. Why would we think increasing income inequality would be correlated with the development of these sorts of norms?

Acting like the rich may be one factor that drives cultural norms of consumption and its likely that cultural trends flow primarily from from elites. But not all elites are rich and more importantly cultural trends can flow uphill (hip-hop anyone?). My point is that consumption norms matter, but thinking only in terms of high and low incomes will have us miss most of the story.

Ideas not Institutions, part 2

[T]he Malthusian epoch is governed by economic forces that will inevitably generate industrialisation and a transition to sustained economic growth. The rapidity of this process may be influenced by different factors including institutions. But institutions, by themselves, do not trigger a take-off from stagnation to sustained economic growth. They simply affect the speed of this transition. Institutions can be viewed as the oil that lubricates the wheels of a train that is already in motion. The presence or absence of oil may affect the speed of the train, but it does not trigger its initial motion.

— Oded Galor in a great interview on Unified Growth Theory (pdf)

(h/t MR)

Links

To establish my Nerd God street cred, here’s some links:

  • Atheist chat: Hitchens is on fire, Dawkins comes off assholish (surprise!) and dogmatic (ironic!), Dennett more pragmatic but a bit senile and I don’t know who the other dude is. Its worth two hours of your time.
  • ARIMA ain’t a Caribbean island: The best introduction I’ve seen to the Box-Jenkins method for fitting time-series data.
  • Social innovation: Udell, the best writer on technology in these parts, says g ain’t new inventions, its some people mastering the technologies and then teaching their learned techniques to the masses.
  • Happy Birthday Perl!

Grammar

“A well educated Electorate, being necessary to self-governance in a free State, the right of the people to keep and read Books, shall not be infringed.”

What does this sentence mean? It seems obvious that it doesn’t mean only educated voters have the right to read books. Its pretty clear that it doesn’t mean only agents of the State can read books. It simply means that because literate voters are good for a nation, the people in that nation have the explicit right to own books.

Well, if you buy that parsing of the above sentence then it seems clear there’s only one way to parse the second amendment:

“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

Because armed citizens are good for a nation, the people in that nation have the explicit right to own guns. The only question that remains is: with what arms shall I express my right to bear?

(h/t LanguageLog)