Published on 14 Jun 2017
Poverty is a big deal – it affects about 41 million people in the United States every year – yet the federal government spends a huge amount of money to end poverty. So much of the government’s welfare spending gets eaten up by bureaucracy, conflicting programs, and politicians presuming they know how people should spend their own money. Obviously, this isn’t working.
This week on Words and Numbers, Antony Davies and James R. Harrigan delve into how people can really become less poor and what that means for society and the government.
June 15, 2017
Words & Numbers: What You Should Know About Poverty in America
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May 26, 2017
Puzzle of Growth: Rich Countries and Poor Countries
Published on 16 Feb 2016
Throughout this section of the course, we’ve been trying to solve a complicated economic puzzle — why are some countries rich and others poor?
There are various factors at play, interacting in a dynamic, and changing environment. And the final answer to the puzzle differs depending on the perspective you’re looking from. In this video, you’ll examine different pieces of the wealth puzzle, and learn about how they fit.
The first piece of the puzzle, is about productivity.
You’ll learn how physical capital, human capital, technological knowledge, and entrepreneurs all fit together to spur higher productivity in a population. From this perspective, you’ll see economic growth as a function of a country’s factors of production. You’ll also learn what investments can be made to improve and increase these production factors.
Still, even that is too simplistic to explain everything.
So we’ll also introduce you to another piece of the puzzle: incentives.
In previous videos, you learned about the incentives presented by different economic, cultural, and political models. In this video, we’ll stay on that track, showing how different incentives produce different results.
As an example, you’ll learn why something as simple as agriculture isn’t nearly so simple at all. We’ll put you in the shoes of a hypothetical farmer, for a bit. In those shoes, you’ll see how incentives can mean the difference between getting to keep a whole bag of potatoes from your farm, or just a hundredth of a bag from a collective farm.
(Trust us, the potatoes explain a lot.)
Potatoes aside, you’re also going to see how different incentives shaped China’s economic landscape during the “Great Leap Forward” of the 1950s and 60s. With incentives as a lens, you’ll see why China’s supposed leap forward ended in starvation for tens of millions.
Hold on — incentives still aren’t the end of it. After all, incentives have to come from somewhere.
That “somewhere” is institutions.
As we showed you before, institutions dictate incentives. Things like property rights, cultural norms, honest governments, dependable laws, and political stability, all create incentives of different kinds. Remember our hypothetical farmer? Through that farmer, you’ll learn how different institutions affect all of us. You’ll see how institutions help dictate how hard a person works, and how likely he or she is to invest in the economy, beyond that work.
Then, once you understand the full effect of institutions, you’ll go beyond that, to the final piece of the wealth puzzle. And it’s the most mysterious piece, too.
Why?
Because the final piece of the puzzle is the amorphous combination of a country’s history, ideas, culture, geography, and even a little luck. These things aren’t as direct as the previous pieces, but they matter all the same.
You’ll see why the US constitution is the way it is, and you’ll learn about people like Adam Smith and John Locke, whose ideas helped inform it.
And if all this talk of pieces makes you think that the wealth puzzle is a complex one, you’d be right.
Because the truth is, the question of “what creates wealth?” really is complex. Even the puzzle pieces you’ll learn about don’t constitute every variable at play. And as we mentioned earlier, not only are the factors complex, but they’re also constantly changing as they bump against each other.
Luckily, while the quest to finish the wealth puzzle isn’t over, at least we have some of the pieces in hand.
So take the time to dive in and listen to this video and let us know if you have questions along the way. After that, we’ll soon head into a new section of the course: we’ll tackle the factors of production so we can further explore what leads to economic growth.
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May 3, 2017
“Poverty, to be scenic, should be rural”
Daniel Hannan on the contrast between rural and urban poverty, and the attitudes of Westerners:
When I was growing up in Lima in the 1970s, Western visitors were astonished by the shantytowns, the barriadas, as they were known, that ringed that grimy city. Why, they asked, did people leave the countryside to live in these squalid slums? Why swap the pure air of the Andes for traffic fumes and sewage?
It was a very First World question. No Peruvian ever asked why people were quitting villages that lacked electricity and clean water. The barriadas may have been ugly, but they were humming with enterprise. They offered work, access to schools and clinics, a power supply. They were, for most of their denizens, transitional, a staging post between mountain squalor and something better.
In time, I came to realize that Western nose-wrinkling at developed countries was more esthetic than sympathetic. As the Victorian novelist Anthony Trollope put it, “Poverty, to be scenic, should be rural.”
Western attitudes haven’t advanced much since then. My kids’ geography homework is full of stories about evil Western corporations exploiting poor women in Vietnam or wherever. Now, you and I would not want to work in a Vietnamese sweatshop. But we have not spent our lives bending our backs in rice paddies.
Employees of foreign-owned companies in Vietnam earn 210 percent of the average wage. The readiness of that country to open itself to trade and investment has brought huge benefits to the Vietnamese, including those on the lowest incomes. Over 19 years, the West struggled to defeat totalitarian socialism in Vietnam, and failed. Three decades of trade have achieved what 60,000 American lives and over a trillion dollars in today’s prices in military spending failed to achieve: the end of Communism.
Developing countries which open their markets eliminate poverty more quickly than those which don’t. Compare Vietnam to Myanmar, or Colombia to Venezuela, or Bangladesh to Pakistan. A study of developing states since 1980 showed that those which had joined the global trading system enjoyed annual growth at an average of 5 percent, as against 1.5 percent for those which hadn’t.
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April 28, 2017
Words & Numbers: Actually, Life is Pretty Awesome
Published on 26 Apr 2017
This week, James and Antony take a brief departure from talking about the growing national debt, and our absurd tax system to discuss the numerous ways in which more economic and personal freedom has made people wealthier, more equal, and better off all over the world. We’re actually living in pretty amazing times.
Read more:
https://fee.org/articles/actually-life-is-pretty-awesome/
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April 25, 2017
Cultural appropriation of “poverty culture” in the Tiny House Movement
Ann Althouse linked to this older article by July Westhale on “Poverty Appropriation”:
How many folks, I wonder, who have engaged in the Tiny House Movement have ever actually lived in a tiny, mobile place? Because what those who can afford homes call “living light,” poor folks call “gratitude for what we’ve got.”
And it’s not just the Tiny House Movement that incites my discontent. From dumpster diving to trailer-themed bars to haute cuisine in the form of poor-household staples, it’s become trendy for those with money to appropriate the poverty lifestyle — and it troubles me for one simple reason. Choice.
The Tiny House Movement began in the ’90s, but has only been rising in popularity since the recession. And to be fair, it’s rooted in a very real problem: more and more people being displaced as a result of soaring housing costs, especially in tech-boom areas like the Bay Area.
[…]
It’s likely, from where I sit, that this back-to-nature and boxed-up simplicity is not being marketed to people like me, who come from simplicity and heightened knowledge of poverty, but to people who have not wanted for creature comforts. For them to try on, glamorize, identify with.
Such appropriation isn’t limited to the Tiny House trend, or even to the idea of simplicity. In major cities, people who come from high-income backgrounds flock to bars and restaurants that both appropriate, and mock, low-income communities. Perhaps the most egregious example is San Francisco’s Butter Bar, a trendy outpost that prides itself on being a true-blue, trailer park-themed bar, serving up the best in “trashy” cuisine and cocktails. With tater tots, microwaved food, and deep-fried Twinkies on the menu, the bar also serves cocktails that contain cheap ingredients, such as Welch’s grape soda. The bar has an actual trailer inside, and serves cans in paper bags, so that bar flies can have a paid-for experience of being what the owners of this bar think of when they think of trailer trash.
Butter Bar in San Francisco (Credit: Facebook)
It’s but one example of an entire hipster movement — can it be called a movement when it’s a subculture rooted not in political consciousness, but in capitalism? — that has brought with it an ethos of poor-culture appropriation and the “re-invention” of things that have largely been tools of survival for poor, disabled, working class, and/or communities of color for decades.
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April 24, 2017
April 18, 2017
Ned Kelly – II: Under Suspicion – Extra History
Published on 25 Mar 2017
Ned’s second venture as a bushranger brought him to the attention of the local police. He did time in prison, then tried to clean up his act, but became frustrated by the suspicion that continued to dog him.
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QotD: Rent control
To someone ignorant of economic reasoning, rent control seems like a great policy. It appears instantly to provide “affordable housing” to poor tenants, while the only apparent downside is a reduction in the income flowing to the fat-cat landlords, people who literally own buildings in major cities and who thus aren’t going to miss that money much. Who could object to such a policy?
First, we should define our terms. When a city government imposes rent control, it means the city makes it illegal for landlords to charge tenants rent above a ceiling price. Sometimes that price can vary, but only on specified factors. For the law to have any teeth — and for the politicians who passed it to curry favor with the public — the maximum rent-controlled price will be significantly lower than the free-market price.
The most obvious problem is that rent control immediately leads to a shortage of apartments, meaning that there are potential tenants who would love to move into a new place at the going (rent-controlled) rate, but they can’t find any vacancies. At a lower rental price, more tenants will try to rent apartment units, and at a higher rental price, landlords will try to rent out more apartment units. These two claims are specific instances of the law of demand and law of supply, respectively.
[…]
In the long run, a permanent policy of rent control restricts the construction of new apartment buildings, because potential investors realize that their revenues on such projects will be artificially capped. Building a movie theater or shopping center is more attractive on the margin.
There are further, more insidious problems with rent control. With a long line of potential tenants eager to move in at the official ceiling price, landlords do not have much incentive to maintain the building. They don’t need to put on new coats of paint, change the light bulbs in the hallways, keep the elevator in working order, or get out of bed at 5:00 a.m. when a tenant complains that the water heater is busted. If there is a rash of robberies in and around the building, the owner won’t feel a financial motivation to install lights, cameras, buzz-in gates, a guard, or other (costly) measures to protect his customers. Furthermore, if a tenant falls behind on the rent, there is less incentive for the landlord to cut her some slack, because he knows he can replace her right away after eviction. In other words, all of the behavior we associate with the term “slumlord” is due to the government’s policy of rent control; it is not the “free market in action.”
Robert P. Murphy, “The Case Against Rent Control: Bad housing policy harms lower-income people most”, The Freeman, 2014-11-12
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April 8, 2017
Ned Kelly – I: Becoming a Bushranger – Extra History
Published on Mar 18, 2017
When Ned Kelly lost his father at a young age, he became the man of the house but didn’t know how to support his family. Swept up by the grandiose tales of a visiting bushranger, young Ned decided to give crime a try.
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March 9, 2017
Words & Numbers: Women Prosper When Markets Are Free
Published on 8 Mar 2017
This week, in honor of International Women’s Day, Antony & James discuss the strong correlation between economic freedom and gender equality found across the world. They argue that if you want to see a world of increasing equality and opportunity for women, you also want to free the economy from central planning and control.
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March 2, 2017
Words & Numbers: The Problem with Alternative Facts
Published on 1 Mar 2017
I this week’s episode, Antony & James talk about alternative facts and how false, partisan data skews important discussions about public policy.
Update: For some reason the original post link was taken private, so I’m reposting to the current version.
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February 27, 2017
Real GDP Per Capita and the Standard of Living
Published on 20 Nov 2015
They say what matters most in life are the things money can’t buy.
So far, we’ve been paying attention to a figure that’s intimately linked to the things money can buy. That figure is GDP, both nominal, and real. But before you write off GDP as strictly a measure of wealth, here’s something to think about.
Increases in real GDP per capita also correlate to improvements in those things money can’t buy.
Health. Happiness. Education.
What this means is, as real GDP per capita rises, a country also tends to get related benefits.
As the figure increases, people’s longevity tends to march upward along with it. Citizens tend to be better educated. Over time, growth in real GDP per capita also correlates to an increase in income for the country’s poorest citizens.
But before you think of GDP per capita as a panacea for measuring human progress, here’s a caveat.
GDP per capita, while useful, is not a perfect measure.
For example: GDP per capita is roughly the same in Nigeria, Pakistan, and Honduras. As such, you might think the three countries have about the same standard of living.
But, a much larger portion of Nigeria’s population lives on less than $2/day than the other two countries.
This isn’t a question of income, but of income distribution — a matter GDP per capita can’t fully address.
In a way, real GDP per capita is like a thermometer reading — it gives a quick look at temperature, but it doesn’t tell us everything.It’s far from the end-all, be-all of measuring our state of well-being. Still, it’s worth understanding how GDP per capita correlates to many of the other things we care about: our health, our happiness, and our education.
So join us in this video, as we work to understand how GDP per capita helps us measure a country’s standard of living. As we said: it’s not a perfect measure, but it is a useful one.
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February 10, 2017
QotD: “First world problems” used to be just “very rich people’s problems”
… my bathroom book (bathroom books are essays or short stories, because if you have never gotten trapped by a novel someone had forgotten in the bathroom and lost the entire morning as well as all circulation in your legs, I can’t explain it to you) is a Daily Life In Medieval England thing. And most of the time I read something that I’m sure the authors thought was new and exotic and think “Well, heck, it was like that in the village.”
[…]
Which brings us back, through back roads to the main point of this post. I was (being evil) reading some of the entries in the medieval life book to older son (having brought the book out of the bathroom to pontificate) and I said “bah, it was like that for us, too. It wasn’t that bad.” And son said “mom, it sounds horrific.” And I said “that’s because you grew up in a superabundant society, overflowing at both property and entertainment, which is why the problems we suffer from are problems that only affected the very rich in the past” (Crisis of identity, extreme sensitivity to suffering, etc.)
Which is also true. And note kindly, that though we’re overflowing at the seams with material goods, property crimes we still have with us, not counting on anything else.
But for my child this is the normal world and it doesn’t occur to him to think of it as superabundant. He just thinks of the conditions I grew up under (I think it was the “most people only had one change of clothes, including underwear” that got him) as barbaric and horrible.
I’ve long since realized that I grew up somewhere between medieval England and Victorian England. Tudor England feels about as familiar to me as the present day which is why I like visiting now and then.
Sarah A. Hoyt, “Time Zones”, According to Hoyt, 2015-06-23.
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January 6, 2017
December 2, 2016
India’s bold experiment in self-inflicted economic wounds
Shikha Dalmia explains why Indian Prime Minister Narendra Modi suddenly decided to kneecap his country’s money supply and cause massive economic disruption:
Modi was elected in a landslide on the slogan of “Minimum Government, Maximum Governance.” He promised to end babu raj — the rule of corrupt, petty bureaucrats who torment ordinary citizens for bribes — and radically transform India’s economy. But rather than tackling government corruption, he has declared war on private citizens holding black money in the name of making all Indians pay their fair share.
Tax scofflaw behavior is indeed a problem in India. But it is almost always a result of tax rates that are way higher than what people think their government is worth. The enlightened response would be to lower these rates and improve governance. Instead, Modi is taking his country down what Nobel-winning political economist F.A. Hayek called the road to serfdom, where every failed round of coercive government intervention simply becomes an excuse for even more draconian rounds — exactly what was happening in pre-liberalized India.
[…]
About 600 million poor and uneducated Indians don’t have bank accounts. Roughly 300 million don’t have official identification. It’s not easy to swap their soon-to-be worthless cash, which is a catastrophe given that they live hand to mouth. It is heartbreaking to see these people lined up in long queues outside post offices and banks, missing days and days of work, pleading for funds from the very bureaucrats from whose clutches Modi had promised to release them.
Modi hatched his scheme in complete secrecy, without consulting his own economic advisers or the Parliament, lest rich hoarders catch wind and ditch their cash holdings for gold and other assets. Hence, he could not order enough new money printed in advance. This is a massive problem given that about 90 percent of India’s economic transactions are in cash. People need to be able to get money from their banks to meet basic needs. But the government has imposed strict limits on how much of their own money people can withdraw from their own accounts.
[…]
This is not boldness, but sheer conceit based on the misguided notion that people have to be accountable to the government, rather than vice versa. Over time, it will undermine the already low confidence of Indians in their institutions. If Modi could unilaterally and so suddenly re-engineer the currency used by 1.1 billion people, what will he do next? This is a recipe for capital flight and economic retrenchment.
The fear and uncertainty that Modi’s move will breed will turn India’s economic clock back to the dark times of pre-liberalized India — not usher in the good times (aache din) that Modi had promised.
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