Poverty Trap


Via Free Exchange, an interesting Drake Bennett article about Charles Karelis’s idea that some poor people are so burdened by problems that it’s not rational for them to address any particular problem:

Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn’t apply to the poor. When we’re poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where the bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The more of a painful or undesirable thing one has (i.e. the poorer one is) the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.

The implication is that, basically, you need to intervene forcefully enough with spending, etc. to get poor people over the hump and into the “normal” range of economic behavior.