Monthly Archive for November, 2007

Paradigms Of Poverty

If you put three economists in a room together one liberal, one conservative, and one libertarian and discussed minority poverty and its causes, how would the discussion unfold? After many years of reading about this topic from various sources, I have come to believe that the break down would look something like this.

The liberal economist would focus more on external causes – institutional racism, racism in general, and the overall affects society has on those in poverty. The solutions to poverty should be immediate and tend to be monetary in nature – so you get welfare, government programs, and lower taxes for the poor.

The conservative economist would focus more on internal causes – the breakdown of the family, the divorce rate, drugs, and overall cultural influences. The solutions to poverty should be long term and tend to focus more on changing the culture – so you get things like Bush’s faith based initiatives, changes in the welfare system so that it doesn’t reward divorce and occasionally something as creative as this.

Thomas Sowell summarizes the conservative economist well when he wrote:

The greatest dilemma in attempts to raise ethnic minority income is that those methods which have historically proved successful — self-reliance, work skills, education, business, experience — are all slow developing, while those methods which are direct and immediate — job quotas, charity, subsidies, preferential treatment — tend to undermine self-reliance and pride of achievement in the long run.

With this in mind, it is easy to see why many conservatives dislike affirmative action.

Up until now the conservative and liberal economist both had a place for government in solving the problems of poverty – whether the problem was internal or external, racial or cultural, government played a role. The libertarian, on the other hand, would have none of this. The libertarian solution to poverty would involve much less (many would argue none at all) government assistance. Though the solution (significantly limited or no government interference) is the same among libertarians, they have strong disagreements among themselves as to why that solution is optimal.

Soft libertarians will argue along the same lines as conservatives, stating that government interference is innately inferior to a free market at solving problems since no matter how you structure the assistance, it will always have a negative affect on culture and promote destructive behavior. So in the end, government assistance is like a dog chasing its tail only that with each spin of the dog the poverty gets worse and the costs more expensive. In addition, a soft libertarian sees a strong state and a strong family as incompatible. If you increase one, you will reduce the other.

For example, Arnold Kling, writes:

Most Western nations have created a cycle of dependency with respect to single motherhood. Government programs, such as welfare payments or taxpayer-funded child care, are developed to “support” single mothers. This in turn encourages more single motherhood. This enlarges the constituency for such support programs, leading politicians to broaden such programs.

He quotes approvingly, this post from Phillip Swagel on social security:

“It is convenient for us who are young to forget about old people if their financial needs are taken care of…But elderly people want and need attention from their children and grandchildren…This, then, is the ultimate trouble with the government spending other people’s money for the support of one part of the family. Other people’s money relieves us from some of the personal responsibility for the other members of our family. Parents are less accountable for instilling good work habits, encouraging work effort…Young people are less accountable for the care of particular old people, since they are forcibly taxed to support old people in general.” (p. 116-117)

Since the family is better suited to deal with these problems than an impersonal state, in the long run this results in a reduction in efficiency and increase, not decrease, in poverty. It is this aspect of government interference that soft libertarians are attune to. For examples of solutions to poverty proposed by soft libertarians read this, this and this.

Hard libertarians, on the other hand, are in a category all on their own. Like libertarians in general, they share the belief that government has a very limited role to play in solving poverty but they take it one step further – in addition to cultural forces, they include IQ. From my reading of the literature, this breaks down into two somewhat independent parts. The first is the strong correlation IQ has with success. The second is the link between IQ and race.

The first point, the strong correlation of IQ with success, seems to be generally accepted. For example, Greg Mankiw, professor of economics at Harvard comments on a paper discussing this very thing:

Among a group of adopted sons, which is a better predictor of high education and high earnings?

(a) Having highly educated biological parents.
(b) Having highly educated adoptive parents.

According to results in a new study of Swedish data from Anders Björklund, Markus Jäntti, and Gary Solon, the answer is (a).

The results in this paper seem broadly consistent with those of Dartmouth economist Bruce Sacerdote, who examines a completely different data set in which adopted children were assigned randomly to parents.

In both papers, nature is stronger than nurture for determining the educational attainment of adopted children, although both nature and nurture have some role. And in both papers, nature completely dominates over nurture for determining income.

Nobody is arguing that IQ is everything, only that it is the strongest predictor of income, much more so than any other single data point you can provide. Hard libertarians will take this one step further and connect it to race, arguing that poverty in the United States, to a large degree, mirrors differences in IQ. For example, why are blacks and latinos disproportionately represented at the lower income levels? Hard libertarians would argue that it’s because blacks and latinos are disproportionately represented at the lower end of the IQ spectrum. For more on this and how it influences the role of government programs, see this, this, this, this, this, this, this and this.

The last link discusses what impact IQ should have on government programs. The link states:

Does it matter that IQ matters? Of course! An investment in education that looks extremely profitable if you don’t control for IQ could easily be a big waste of money. The reason: If you don’t control for IQ, you are giving education a lot more credit than it deserves. To say “Let’s focus on the things we can change” dodges the hard truth: After you adjust for what you can’t change, the things that you can change may give you very little bang for your buck.

Thus, IQ is highly policy-relevant after all. The left-wing ideologues who damn anyone who even thinks the letters “IQ” are actually on to something: IQ research does turn out to be a rationale for “right-wing” laissez-faire policies. The more IQ matters, the more likely it becomes that existing government policies are a waste of money – and that you would get a bigger payoff by doing less – or maybe nothing at all.

There are several arguments, convincing IMHO, one can make against hard libertarians (Thomas Sowell, most notably, making the strongest one, see here) though admittedly I have not spent much time looking closely at the disagreements (yet). My point here is not to say who is right and who is wrong, to defend one and criticize the other, only to outline, as best as I can, what the differences are in assumptions between the various schools of thought. For even when you get all of the economics correct, the initial preferences are still very different and shape a good portion of the debate.

In Their Own Words

Some notable key findings from a recently released Pew Research Center survey on race values and identity:

(1) African Americans see a widening gulf between the values of middle class and poor blacks, and nearly four-in-ten (37%) say that because of the diversity within their community, blacks can no longer be thought of as a single race.(2) 72 percent of whites, 54 percent of blacks, and 60 percent of Hispanics agree that in the last 10 years, “values held by black people and the values held by white people (have) become more similar.”

(3) Blacks are less optimistic about the state of black progress now than at any time since 1983. Looking backward, just one-in-five blacks say things are better for blacks now than they were five years ago. Looking ahead, fewer than half of all blacks (44%) say they think life for blacks will get better in the future, down from the 57% who said so in a 1986 survey.

(4) 67 percent of black men and 74 percent of black women think rap music is a bad influence on black America. In fact, 59 percent of black men and 63 percent of black women think the whole hip-hop industry is equally detrimental to black America.

(5) But apparently, Obama, Winfrey and Cosby are good for black America. Three-quarters of blacks (76%) say that Obama is a good influence on the black community. Even greater numbers say this about Oprah Winfrey (87%) and Bill Cosby (85%), who are the most highly regarded by blacks from among 14 black newsmakers tested in this survey. By contrast, just 17% of blacks say that rap artist 50 Cent is a good influence.

And the real kicker:

(6) A 53% majority of African Americans say that blacks who don’t get ahead are mainly responsible for their situation, while just three-in-ten say discrimination is mainly to blame. As recently as the mid-1990s, black opinion on this question tilted in the opposite direction, with a majority of African Americans saying then that discrimination is the main reason for a lack of black progress.

Not exactly the image that the Jesse Jacksons and Al Sharptons of the world give, is it?

Quote Of The Day

” If we look at the history of Western civilization, we find that Christianity has illuminated the greatest achievements of the culture. Read the new atheist books and make a list of the institutions and values that Hitchens and Dawkins and the others cherish the most. They value the idea of the individual, and the right to dissent, and science as an autonomous enterprise, and representative democracy, and human rights, and equal rights for women and racial minorities, and the movement to end slavery, and compassion as a social virtue. But when you examine history you find that all of these values came into the world because of Christianity. If Christianity did not exist, these values would not exist in the form they do now. So there is indeed something great about Christianity, and the honest atheist should be willing to admit this.” —Dinesh D’Souza, author of What’s So Great About Christianity, writing about his recent debate with Christopher Hitchens, author of God Is Not Great

The Importance Of Early Education And School Choice’s Part

“Dutch parents can indeed choose their children’s school. The schools are good, even though the country spends less on education than the OECD average. And, crucially, Dutch schools are selective – something that Britain supposedly lost when it abolished most grammar schools in the 1960s and 1970s. Whereas British kids used to be selected for life aged 11, in Dutch schools selection never stops. At any age pupils can rise or fall a track. In theory, you can enter the VMBO [schools in the lower academic tier] aged 12 and end up a professor. This flexibility is crucial, because schools are society’s best means of redressing the inequality with which children start life. “The Netherlands combines both school choice and academic selection in what many see as an ideal education system,” concludes Reform, the British free-market think-tank”.(emphasis added) —FT correspondent who went to school in both Britain and the Netherlands

Another Monterrey Trip

Well its been almost a year since I visited my grandma and family in Monterrey, Mexico and given that she is in her 90’s, I want to see as much of her as I can. So in a few hours I get on a plane and head out for a much needed vacation.

Here is the reason why I make so many trips, my beloved abuelita:

I wish everybody a Happy Thanksgiving and will resume posting on Monday when I get back. 😀

Quote Of The Day

“The idea that an American could, under any circumstance of naturalization, become a governor of an Indian province, or be elected to high office in Austria seems remote. Yet we take the inverse for granted here. On Sunday night I spoke to a Jewish group in Fresno in support of Israel; on Wednesday I debated at a local mosque. The two venues were not more than 5 miles distant in the same city. Both were peaceful, both conducted to an accepted American sense of lecture, questions and answers. For all the talk of lack of diversity and rampant exploitation and prejudice, this is about the only country in the world in which a myriad of races, religions, and tribes get up each morning, work side by side, and are more likely to marry than kill each other.” —  Victor Davis Hanson

Flores On Freedom

The video is viewable here. Via my friend Peter.

A must see for anybody interested in Latin America.

Quote Of The Day

“I tend to think that race is over-rated as a predictive factor in America. For instance, in education, they always talk about the “black-white test gap.” They never talk about the “unwed mother vs. two-parent test gap.” I’ll bet that the latter is larger”. —Arnold Kling, discussing Walter Williams article on broken families and poverty

Quote Of The Day

“Opposing school vouchers is, for basically every single person who does so, a completely costless belief. You get the pleasure of “supporting public education”; [while] someone else’s kid, whom you will thankfully never meet, loses their future.” —Megan McArdle

Quote Of The Day

“. . as far as test scores improving and such, it seems that people who focus on that exclusively might be bewildered by why inner city parents like the voucher school a lot better than the public school. Even if their child’s chance of going to the state university is not increased by his new school, the kid’s chance of ending up in the state penitentiary is radically decreased. This consideration might never get onto a suburban parent’s radar screen, but it matters in Newark”. —comment of the week, on Megan McArdle’s discussion of vouchers

Quote Of The Day

“In fact, for the malcontents of Hollywood, academia, and the catwalks, Chávez is an ideal ally. Just as the sympathetic foreigners whom Lenin called “useful idiots” once supported Russia abroad, their modern equivalents provide the Venezuelan president with legitimacy, attention, and good photographs. He, in turn, helps them overcome the frustration John Reed once felt—the frustration of living in an annoyingly unrevolutionary country where people have to change things by law. For all his brilliance, Reed could not bring socialism to America. For all his wealth, fame, media access, and Hollywood power, Sean Penn cannot oust George W. Bush. But by showing up in the company of Chávez, he can at least get a lot more attention for his opinions.  As for Venezuelan politics, or the Venezuelan people, they don’t matter at all. The country is simply playing a role filled in the past by Russia, Cuba, and Nicaragua—a role to which it is, at the moment, uniquely suited”. —

What Makes Education Special?

There are plenty of other goods and services that we want to make sure people have; food, shelter, and clothing come to mind. But with food, do we expect the government to run the farms and grocery stores? No. If some people can’t afford food, we subsidize them with welfare checks or (if we want to make sure they’re really buying food) with food stamps. Do we expect the government to provide housing? Well, we’ve had our experience with public housing, and it’s been almost uniformly recognized (even by liberals) as a disaster. So now advocates for the poor push for housing vouchers, which poor people can use to pay some or all of their rent. Do we expect the government to provide clothing? No. Again, we give poor people welfare checks, which they can use to buy clothes. If we were concerned that they were buying too much booze and too few shoes, we’d probably give them clothing coupons. (Maybe we already do.)

So, to repeat Megan, what makes education special? Education is not especially different from many other goods and services. It has no unusual features that make it unlikely to be provided by a private market in an efficient fashion. The only issue is that some people might not be able to afford it. So why not just give people money (in the form of vouchers, to make sure they spend it on education) and let them go to their provider of choice?

It is a question I alluded to previously, here.

The Irrelevance Of Income Inequality

“Nevertheless, measures of inequality of incomes do indeed vastly overstate the inequality of material living standards. Nearly all Americans enjoy easy access to the likes of microwave ovens, cell phones, the Internet, and MP3 players, as well as, of course, to food, clothing, and shelter. So the differences separating the super-rich from ordinary folks are increasingly abstract and invisible. I’m told that, say, David Koch has billions more dollars in his bank account than I have in mine, but I never see his bank statements. The fact is, Mr. Koch is no better fed, clothed, or coiffed than I am. And when he walks down the street, Mr. Koch’s immense wealth does little to distinguish him from the many middle-class Americans who walk past him – all unaware that his portfolio is unusually hefty”. — Donald J. Boudreaux

Quote Of The Day

“However, if poverty is defined in the relative sense, the lowest fifth of income-earners, “poverty” will always be with us. No matter how poverty is defined, if I were an unborn spirit, condemned to a life of poverty, but God allowed me to choose which nation I wanted to be poor in, I’d choose the United States. Our poor must be the envy of the world’s poor”. — Walter Williams, professor of economics at George Mason University, commenting on the dramatic increase in standard of living the ‘poor’ in the United States have experienced, especially compared to the rest of the world

Quote Of The Day

“…too much of the conversation has been about the effect of all this on the party – about whether the GOP is condemning itself to years in the electoral wilderness by alienating an influential constituency. What I haven’t heard enough about is how this neglect hurts Hispanic voters. In politics, the surest path to irrelevance and powerlessness is to be taken for granted by one party and written off by another. That is the road Hispanics are on now, thanks to some major blunders by the Republicans running for president”. —Ruben Navarrette

Karl Rove On The Democrat Congress One Year Anniversary

He writes:

This week is the one-year anniversary of Democrats winning Congress. But House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid probably aren’t in a celebrating mood. The goodwill they enjoyed after their victory is gone. Their bright campaign promises are unfulfilled. Democratic leadership is in disarray. And Congress’s approval rating has fallen to its lowest point in history….

Even worse, the Democrats have made clear all their talk about “fiscal discipline” is just that–talk. They’re proposing to spend $205 billion more than the president has proposed over the next five years. And the opening wedge of this binge is $22 billion more in spending proposed for the coming year. Only in Washington could someone in public life be so clueless to say, as Sen. Reid and Rep. Pelosi have, that $22 billion is a “relatively small” difference.

Let’s also be clear about what it means to roll back the president’s 2001 and 2003 tax cuts, as the Democrats want to do. Every income-tax payer will pay more as all tax rates rise. Families will pay $500 more per child as they lose the child tax credit. Taxes on small businesses would go up by an average of about $4,000. Retirees will pay higher taxes on investment retirement income. And now we have the $1 trillion tax increase proposed as “tax reform” by the Democrats’ chief tax writer last month.

Failing to pass a budget, proposing a huge spike in federal spending and offering the biggest tax increase in history are not the only hallmarks of this Democratic Congress….

Democrats promised “civility and bipartisanship.” Instead, they stiff-armed their Republican colleagues, refused to include them in budget negotiations between the two houses, and have launched more than 400 investigations and made more than 675 requests for documents, interviews or testimony. They refused a bipartisan compromise on an expansion of the State Children’s Health Insurance Program, instead wasting precious time sending the president a bill they knew he would veto. And they did this knowing that they wouldn’t be able to override that veto. Why? Because their pollsters told them putting the children’s health-care program at risk would score political points. Instead, it left them looking cynical.

The list of Congress’s failures grows each month. No energy bill. No action on health care. No action on the mortgage crisis. No immigration reform. No progress on renewing No Child Left Behind. Precious little action on judges and not enough on reducing trade barriers. Congress has not done its work…

The full article can be found here.