On Bryan Caplan’s recommendation, I just read The Persistence of Poverty, by Charles Karelis (2007). Karelis seeks to explain these patterns: Five patterns that have been common among the poor in many times and places, then, and that played a role in keeping them poor or making them poorer, are: 1. not working much for pay; 2. not getting much education; 3. not saving for a rainy day; 4. abusing alcohol; and 5. taking risks with the law. … [And] having children early and out of wedlock … is doubtless a big factor in poverty in the United States today.
What culture? Many poor people, and I ran into quite a few of them as a registered nurse, work their rear ends off just to survive. Not everyone has the intelligence or the option to obtain a higher education and end up with a high paying job. I saw people who never missed a day of work, but the state's minimum wage was a whopping $7.25 an hour, plus many worked for years in the textile industry and the plants shut down kicking them to the curb, shafting them on their retirement, and leaving them with only Social Security when they became of age. Many were "frequent flyers" to the hospital because they simply couldn't afford their medications. Our problem is we've allowed those at the top to increase their income exponentially, while the vast majority of the population's income hasn't even kept up with inflation for decades.
"However, I gave more weight to this account after I realized that it is implied by my usual favorite account of income status: utility linear in income rank. As income is usually distributed lognormally, the function relating rank to log income must be convex below and concave above median income. This implies diminishing returns in income above median income, and a range below median income with increasing returns to income. When you have increasing returns to income, you value each unit of income more when you have more of it, rather than the usual diminishing returns case, where you value each unit of income less, the more income you have."
This paragraph could use a graph to help the explanation. I found it very insightful, but had to spend 3 minutes going back and forth between here and wikipedia to clearly understand what you were saying.
Indeed, this is most likely the case. Sheeple is as sheeple does. On a different note, it's very important to note that culture is not independent of the people who produce it. The Western poor follow their cultural models - but then they followed their innate proclivities in creating these models. Their culture doesn't induce them to dig themselves out of poverty because they are the kind of people who don't have a proclivity for the behaviors needed to escape poverty. It's a vicious circle, and it cannot be cut by transplantation to a different culture - because of the innate qualities of the poor.
I get that. Your and Karelis's mechanisms (explanations for the difference in felt relief across the two cultures) are still different.
The lower Asian immigrant norm comes from their comparing their situation now with the lower income their ancestors had in Asia.
So your account can explain Karelis' result (over a certain income range) if Asian immigrants have a higher median income than African Americans? I guess that's true but the mechanism is different from Karelis's ( in which it is poor Asians' comparing with their lower norm which makes the difference).
The median income in your culture depends on your culture.
I get Robin's comment about "utility linear in income rank" implying that returns to income are increasing *below* the median income and decreasing *above* the median.
But I don't see how this explains Karelis's account of how the "felt relief" of a marginal dollar can depend on cultural expectations. Can Robin or someone help me connect the dots? Thanks.
Well "no one" is obviously an exaggeration. But one could plausibly argue that few people make long term plans that deviate much from the cultural models with which they are familiar.
What reading do you recommend on reasons of poverty in modern societies?
The prior post I linked to was about a paper that already addressed that to some extent.
"One might plausibly argue that no one ever really makes long term plans" - seriously? All long-term investments some of us make is nothing but sheeple going along with community expectations?
Well, I do make long-term plans, and I execute them doggedly, going against the grain if necessary. Ever since I was about 9 years old I had a vision of myself that is grossly out of sync with the "standard cultural plan" and ever since I have shaped my biggest life choices to advance in that direction. Yes, there are lots of distractions and diversions along the way but the over-arching vision at the longest accessible time horizon still controls my life.
I am pretty sure I am not the only one who thinks ahead on his own.
"Then the “extra” we’d need to add, to explain why the poor don’t seem to have long term plans to dig them out of poverty, is to say that the cultures of poor people often don’t have standard cultural plans that induce them to so dig."
This jibes well with the picture painted by Mauricio Miller on the latest EconTalk: http://www.econtalk.org/mau...