“Evicted”, an ethnographic study of tenants in low-income housing (2016) | Hacker News Reader

“Evicted”, an ethnographic study of tenants in low-income housing (2016)

theguardian.com

130 pointshamiltonians169 comments

Important frame to consider, here in the comments: we're all reacting to an article that's reviewing a book. A long work of sociology.

So the article isn't the ground truth; it's a tiny digest, plus a reaction by the article's author. The book itself is a project of research, which also isn't ground truth. But they bring up provocative points that most people haven't considered.

And in some cases, won't consider. If your mental model for how the economy works somehow doesn't allow the situations described in the book or article, I'd hazard to say it's your mental model that's in error.

standing ovation

> If your mental model for how the economy works somehow doesn't allow the situations described in the book or article, I'd hazard to say it's your mental model that's in error.

What situations? People being evicted? People paying rent for trailers? What economic insight are you supposed to take away from those things?

I would say that if your mental model of how society works does not include those things, yeah, it should. If everyone realized what was happening, maybe there would be more support for basic income, Section 8 vouchers, etc. That's my view--raise taxes and give more money to poor people so their lives are better. But that's an entirely different point, and not one that the article is making.

The article is an archetypal example of what I call "well intentioned but economically ignorant liberalism." The folks who campaigned to make tenements illegal were not conservatives. They were liberals genuinely concerned about the living conditions of those residents. However, they were also ignorant about how economics works. So they tried to address the problem simply by making tenements illegal (i.e. taking an option away from poor people).[1] Calls to regulate check cashing places and payday lenders out of existence (or articles that demonize landlords who rent to poor people, like this one) fall into that same bucket.

Reading the article, what kind of solution do you think the article is leading you to? Maybe making it harder for landlords to evict tenants, or limiting the rents that trailer parks can charge tenants. What does that do? Cause landlords to be less willing to rent to poor people, or less likely to invest in a new trailer park. I.e. it takes options away from poor people, and ironically reduces competition and raises prices in the markets that cater to poor people. Making some poor people better off (e.g. the ones that get the trailer park before the rent controls kicked in), but making poor people as a whole worse off.

[1] https://fee.org/articles/the-hidden-war-on-affordable-housin...

I don't think there's an easy answer. Therefore, we should not expect obvious policy prescriptions from the article, book, research project.

(I do hear your objection about the title; I see HN's title is updated to be less click-baity, and more reflective of the book's content.)

I think the point of the book is to try to understand the situation as lived by poor people, and (if I recall the longer-form radio review correctly) the role eviction specifically plays in the cycle of poverty.

To the extent there's a policy prescription here, it's to focus poverty-relief efforts on housing security. To the extent there's an economic prescription here, it's perhaps just the realization that the rental market, as it currently exists, is playing a role in that cycle of poverty (leaving aside exactly how "free" the market is in the first place).

Seeing the work in isolation, though, and looking for answers... I think that misses the point. Personally, I see this as another insight into how expensive it is to be poor: whether it's banking, housing, educational opportunities, etc, the poor are dealing with a different set of challenges and tradeoffs than I experience. (Hence, the utility of the book.)

>support for basic income, Section 8 vouchers, etc. That's my view--raise taxes and give more money to poor people so their lives are better.

So in another comment you describe your politics as "right". Most politically right folks think that government subsidies for the poor crowd out private charity. Do you think otherwise?

This is a really, really good comment. Book reviews are sometimes so deep and thoughtful that they are themselves worth reacting to, but they're never equivalent to the work reviewed. The presence of a positive-and-stupid book review does not invalidate the actual book (and conversely, a positive review does not guarantee a thoughtful book).

One step closer: this is the summary by the author http://www.newyorker.com/magazine/2016/02/08/forced-out

>If your mental model for how the economy works somehow doesn't allow the situations

My mental model certainly allows for the situations such as evictions and landlords making money because that much is obvious just by looking around.

However, my mental model will not accept the journalist's headline claiming that "the Problem of poverty is that it's Profitable". That makes no sense. To test the journalist's assertion, just flip the words around: "the Solution to poverty is to make it Money-Losing!"

This means that to "solve poverty", the landlord charges less than the cost of maintenance / property taxes / interest on loans / etc. Eventually, the landlord's bank account leaks away until the landlord herself is in poverty. And who then steps up to lose money to "solve" the landlord's poverty? The city accepts less property tax payments than it costs to maintain roads, schools, and salaries of the government staff? The grocery store accepts less payment than the cost of milk and bread? And who solves the poverty of the workers of the city government and grocery store that were laid off? How do we keep this chain of everybody losing money going so poverty is solved?

I don't think anyone's saying that the solution to poverty is for landlords et al to start losing money. That's a ridiculous straw-man. The article points out that many people profit by keeping others in a powerless state and exploiting them. It doesn't posit a specific solution

>I don't think anyone's saying that the solution to poverty is for landlords et al to start losing money.

And I'm not claiming anyone is saying that or pushing it as a realistic policy. Instead, I'm asking readers to think about it as a thought experiment to test the economic validity of what the journalist is saying.

>It doesn't posit a specific solution

Can you explain from a logical standpoint why taking the opposite of what the journalist said is not an _implied_ solution that's worth testing?

That's not a valid thought experiment, though.

First, because the truth of (A -> B) doesn't determine the truth of (!A -> !B), which is what your title inversion did. And second, because (A -> B) does imply (!B -> !A), but you haven't established (A -> B).

If something causes a problem, that doesn't imply that inverting the thing will solve the problem. "Poverty is widespread because people profit from it" does not imply "poverty would disappear if people lost money when it happened". So you haven't actually said anything about the headline by mocking its inverse.

>does not imply "poverty would disappear if people lost money when it happened".

That's true but that's also not what I wrote. Your derived hypothetical has a vastly different meaning than "not profiting in transactions is the solution to poverty".

>First, because the truth of (A -> B)

Using strict math logic is not applicable to this. Instead, we're talking about the "logic" of human choices and how to parse English sentences.

>If something causes a problem, that doesn't imply that inverting the thing will solve the problem.

If we claim that "the problem of a child dozing off in class is that he works late at night" then yes, we are implying that the child should not be forced to work at night and instead get a full night's rest. This is how we normally parse things when proposing prescriptive recommendations.

(Yes, if we attempt to use a strict math logic framework, we could say that !B->!A == "he's not working at night therefore he's not dozing in class" which can't be 100% true since there isn't enough information. Therefore, valid negations in abstract math don't perfectly carry over to negating English sentences.)

In any case, do you really think "the problem of poverty is that it's profitable" is a meaningful and insightful statement? (I actually lived in poverty as a child and I find it ridiculous.) The journalist isn't just suggesting that "_a_ problem of poverty is profits" but provoking readers with "_the_ problem of poverty is profits".

I read Evicted. The key takeaway is this: Poverty isn't simply about income/money. The root issues are more complicated. And anyone who thinks "just work harder" Probably doesn't have a fucking clue.

Why not? If poor people costed landlords money they unfortunately have two solutions.

Good one: make those people no longer poor by any means at their disposal.

Evil one: get rid of poor people.

If this were too be enforced globally (including closing loopholes such as homelessness) the evil solution would have to involve breaking the law by someone. (I'm thinking of a quota requiring building and maintenance of x amount of housing for the poor of specified standard, rent controlled. Including rentals.)

Thanks for this, I think it's really important.

I wouldn't usually post, but I'm not sure if this is a shared experience for most HN people so here goes.

My hometown in Alaska didn't have a road out. The the market price of the least expensive apartments was approximately %100 of the full time minimum wage net income. People my age who couldn't live with their parents or be students often crowded secretly into small apartments, and sometimes lived in cars or squatted in the woods, all of which is uncertain, illegal, and a barrier to self improvement and long term planning. People who couldn't afford to live there also couldn't afford the plane ticket to Seattle, so they would get stuck.

There was no CS program at the tiny local university, so I moved "down south" to work, wait for residency, and become a student. I saw a lot of the same problems with a varying, but still impossible (rent):(minimum wage) ratio. I eventually decided that trying to work your way through school while paying rent is a dumb idea and I was later fortunate enough to find another way. Meanwhile I had, and saw, a lot of these kind of problems.

When you can't pay for normal housing, it's illegal to reduce your consumption. Leases have occupancy limits and loitering and squatting are illegal. When you live in a spare room, closet, tent, or car you can get kicked out, arrested, ticketed, or impounded. As far as I could figure out, public assistance was not given to young, able, single men.

So you choose between consuming more housing than you can afford, or breaking the law. The cheaper you live the more risky or illegal it is, so people kind of end up doing both. You do unsustainable things to pay rent like borrowing from family or credit cards. You avoid landlords and maintenance staff because you aren't on the lease, can't afford the rent hike for increased occupancy, can't pass the credit check, can't pay the deposit. Your car gets impounded because it's not registered. There's no bus to the suburbs. A cab costs most of your wage. You get fired for being late when you wake up in the morning and your car isn't there.

I saw this kind of thing first hand and I feel fortunate to have got out of it with out any long term consequences, except in my mind. My partner gives me a hard time because it still makes me a little nervous that I can't fit all my stuff in the car and be ready to leave town.

I'm not saying that I thought I had a right to live somewhere I couldn't afford. I just wished that people wouldn't judge me so harshly, or trivialize my problems. I tried moving to a lot of different places. Sometimes I couldn't get full time job. Sometimes I got fired. Sometimes I couldn't get a wage paying job, and had to settle for commissioned piece work. Sometimes I did day labor. Sometimes I couldn't find anything at all.

There are lots of ways to fail to earn enough for rent. As an able young man, I found people extremely unsympathetic to my inability to prosper, or afford "normal" things. I sometimes find myself listening politely while people say very unkind things about the poor, apparently without a clue that I take it personally. Of course they don't call them poor; they call them "tenants" or "unemployed" or "welfare cheats". I have even heard it remarked that _real_ poverty doesn't exists in the U.S. because we give them welfare and free food, so no one should complain. Can a person be happy without autonomy and mobility to chose their place and manner of earning a living? Is starvation the only legitimate hardship exists?

I like having labor and housing standards, but we need to acknowledge that there are people that are priced out of the regulated housing market. Their existence is effectively criminalized. I felt like the state wouldn't help me and wouldn't let me help myself.

I think market failures or structural problems are sometimes willfully overlooked in America in sort of the same way that the poverty couldn't exist in communist states.

I'm really not sure what to do about this, but it would be nice to start by admitting the possibility of some problem other than a lack of individual moral virtue.

Thank you for sharing this.

I've always argued that I'm 3 events away from living under a bridge. Losing my health, losing my mind, and losing my family. People walk around thinking they are different than the crazy person on the corner. They aren't. They are just 3 events different.

I've read Evicted. It was so disheartening that I almost couldn't finish.

My biggest complaint was the end was a lot of stats and such. I thought he should have started there. Else, I could imagine most people never made it to the best part.

On the positive, the bit about how a single eviction can disrupt an entire neighborhood was mind blowing. I'm not doing it justice, but you'll know what I mean once you read the book.

The assertion implicit in the headline ("poverty exists because it's profitable") is the article's assertion, not the book's.

This is quite silly. Through all of human history the vast majority of people have been miserably poor, and it's only recently that a slice of humanity has managed to claw their way out of poverty. Poverty should be considered the natural state of humanity, not an anomaly that needs explanation.

Poverty should be considered the natural state of humanity, not an anomaly that needs explanation.

This is the truth. But for clarification that's not to say that we shouldn't fight it.

> miserably poor

Poor as in not wealthy, sure. But miserable? No, I doubt that.

Yes, if you compare wealth between different time periods many people have more wealth today than they did yesterday, but that's not important. Poverty is a measure of economic relationships: What matters is differentials in access to resources and means of production and how those differentials shape the structure of our society today. Even if an impoverished family in Appalachia today has more wealth than hunter gatherers several thousand years ago, their poverty marginalizes them, immiserates them, and drives the decay of the social structures around them. The issue is social relationships, not absolute wealth. It's about the dynamics of our society and how class structures form around economic relationships.

Comparing wealth between time periods is always a red herring in discussions about poverty. Poverty certainly does exist because it's profitable because poverty is about class and economic relationships today, not the relative wealth between, say, a vagrant in San Francisco and a vagrant in Rome circa 50 CE.

I have first hand experience with this. After being swindled badly in the sale of a small business, I was forced into foreclosure and chapter 13 bankruptcy. For roughly 8 years, I was trapped in a situation where I had crippling debt, and had lost my primary source of income. This started in 2008 so finding a job that paid well enough to stop the bleeding was out of the question.

What happens when you get in a situation like this? Every dirtbag on the planet who has an idea about how to profit off it will appear. This was especially true of real estate agents, as well as people peddling legit sounding loan restructuring programs. It is a huge pile on and it really wears you down (besides the stress of not knowing from week to week if you home is going to be auctioned off at the courthouse, not being able to pay for luxuries like basic dental care, and so on).

If you have not been there, you have no idea at all how difficult it is to get out of that trap once you are in it.

I took the claim to be that they're poorer than they might've been because it's profitable for people to extract wealth from them -- that is, it's possible to extract more wealth than you return in value by leveraging social structures. Further, that this profitability in modern times is trapping people in poverty, when otherwise people might not be "poor".

You've done nothing to address this claim, at all.

Isn't poverty a inherently relative term? It means you're impoverished relative to the contemporary living standard. To be impoverished is to be very poor, to be poor is to have less, and you have to be comparing against something to define a quantity against it.

So yes, relative to today's average first-world citizen, even the wealthiest humans from the past have been impoverished. But I don't think that's a useful framing.

The default state of humanity is to be a hunter-gatherer in a tribe. It's to spend the day walking/running long distances to find food and coming home at night to eat it and sleep, or to spend the day preparing the food and living quarters for eating/sleeping at night and making sure the children are safe. Within this context, the only poverty that exists is the bounty of the land which one happens to inhabit.

Our tribal past is often skimmed over, but I think it's instructive as to what systems and processes work well and allow the species to evolve and flourish. Psychology is a thin veneer atop biology. We should be careful to ensure that our conduct, both personal and systemic, is biologically compatible.

But it's clear that the drive for profit is a contributor to poverty; arguably a lot of it today exists because of the profit motive. Furthermore, many people can't "claw their way out of poverty". I'm not really sure what point you're trying to make here; the elimination of poverty is a goal that is to be strived for, even if it cannot be reached.

I absolutely agree that we should strive for the elimination of poverty, and that many people can't "claw their way out of poverty."

My point is just that we shouldn't start from the false premise that prosperity is the natural state and poverty must be explained, because you may end up blaming symptoms (in this case, landlords--in other cases, it's check cashing companies[0], or sweatshops[1], or the "profit motive") and implement a "treatment" that makes the poor even worse off.

[0] http://www.businessinsider.com/check-cashing-stores-good-dea...

[1] http://www.slate.com/articles/business/the_dismal_science/19...

Everybody here should read the book that this article is reviewing: Evicted by Matthew Desmond. It's an incredible accomplishment in sociology and one of the most insightful works on poverty I have ever encountered.

haven't economists talked about how, in general, charging rent is not really creating economic value? patent trolls, landlords, rich investors, for example... all to some degree just rake it in based on what they already have. of course there is some strategy involved, and there is work too. but maybe the point is that the way things are set up now, the reward for the work goes on indefinitely, which makes no sense. you inherited a family property and are able to profit off it your entire life, since the cost of maintenance and property taxes is offset by rent you earn from some agency renting out your house? i dont see how you are personally contributing anything. some investors already have vast sums of money, so they are able to earn vastly more sums by putting it in an index fund? also not fair, though i suppose you are "taking a risk", but i dont really find that all too compelling. you just sit there and rake in dividends and ~3% roi. suing a company for using tech that they invented but didnt patent? you are just a pure minus on society in that case. these things are all rent-seeking behaviors, i dont see how they really do anything for the greater good. i think we need to tell people who try to make money by charging rent to basically fuck off. not that you are a bad guy for doing it in many cases, but we should recognize it for the unfair practice it is.

> landlords, rich investors, for example... all to some degree just rake it in based on what they already have.

This is a simplistic view that is demonstrably incorrect. For example, I rent out part of my house but do so to help pay the mortgage. So technically I do not fully own the property I rent. Furthermore, maintaining a property and assuming liability are not free.

sure. not you personally then. but a lot of landlords.

The argument would be that the right to seek rent from your capital goods, whether created, bought, or inherited, is what drives people to create these rent-creating systems in the first place.

If people didn't have the right to seek rent from the houses they build or inventions they come up with, why would they expend the effort in the first place?

(note, I don't take that view exactly, I believe motivation comes from a whole lot of places)

Not your view exactly, perhaps, but cuts to the heart of Efficient Market Hypothesis.

yes, its a good point to make. and not wrong, but i wouldn't say its the whole story. people have been creative and ingenious long before money existed. i certainly dont have enough historical knowledge, evidence, or thinking to make a compelling argument that money doesn't inspire creativity, but i really do have a suspicion that most good stuff comes from people who do it "just because", not to get rich. look at the incredible academics, artists, writers etc throughout history that weren't ever rich, nor really made the effort to be. but, for lots of day to day stuff, i do think money keeps the gears turning. so, i guess "why would they expend the effort in the first place?" ... because its fun.

Support the estate tax! And do it vocally, it will be coming under fire soon.

i.e. support double taxation. no thanks.

All taxation is double (triple, quadruple, etc) taxation.

like sales tax on net income?

Charging rent does have economic value.

Example: a retiree, using his retirement savings, purchases an apartment building. Now, he has a steady income, that he can use to pay for his expenses indefinitely -- as opposed to knowing he will run out of money at some point. The tenants benefit as well, because they have little savings, but an income instead (because they are still able to work, as opposed to the retiree). By exchanging income for wealth, the tenants and the retiree mutually satisfy each other's interests without harming anyone.

Rent is almost always higher than a mortgage payment but that requires a downpayment (i.e. not being poor) -- thereby they are saving less than if they can own. Basically the point of this article -- poor people who have to rent are subsidizing this retiree's retirement... its profitable.

An income is not a profit (capital gain). Retirees aren't profiting from their ability to convert their wealth into income, they're simply surviving.

I'm not talking about rich retirees. I'm talking about hundreds of millions of people all over the world, who've saved up something and therefore, when they come to the point where they are unable to work, they purchase an asset with a yield -- it can be anything: a bond, shares in companies that rent out apartments, stocks, land lease etc. -- in order to convert their savings into an income. The more your savings, the higher the income, but when you are no longer physically able to work, you have no choice left (unless you're lucky enough to live in a country where there's someone to help you).

Also, who do you think is the recipient of mortgage payments? People who've deposited money with the bank in question, eg. retirees. A mortgage is an exchange of wealth for income using a bank/credit union as an intermediary.

Charging rent is the means by which the owner is compensated for managing the risk of the asset for the sake of the inhabitant, dealing with local regulations, and checking the depreciation. The other examples are just abstractions, but the principle is the same: value isn't static. The underlying asset often has to be managed and its risks reevaluated. There is no guarantee that you just get to "sit there and rake in dividends".

that is true and your point is well taken. i think the crux of my point is that its out of scale with what i feel is fair. that is, the risks do not seem big enough to warrant the returns. i get that the returns are determined by the market, but i dont think thats a compelling argument in favor of fairness.

obviously you are not a landlord. there are many, many risks and costs to owning property, which is why not all landlords even make any money at all.

are you really disputing the fact that there are some people who make a shit ton of money owning property that dont really deserve it? thats crazy.

if they own the property and someone is willing to pay the rent then yes, absolutely they deserve it. are you suggesting we take away property rights?

i think thats a very simple and flawed way of thinking about it. it sounds like all you are using to determine if someone deserves something is if it is legal- the problem is your idea of "deserve" changes when the laws change. that seems silly.

hardly, obviously there is a difference between what is "legal" via a governing body and "natural law" or "right and wrong". I would agree with you that not everything that is "legal" is "right".

but in this case if I take on the risk of investing in real property, and of the risks that comes with that, then I deserve fair market rent on that property. and if over decades I accumulate multiple properties that produce in your opinion large amounts of income then I deserve that, too. and if I leave these properties to my descendents, then there's nothing inherently wrong with them owning those properties and getting that income, is there?

using your logic, you could also ask the question if people who cash out in IPOs "deserve" to become millionaires overnight.

correct, i think in lots of cases, including several i have first hand experience with, many people didn't deserve to become millionaires overnight that did. also, people who hit the lottery buying domain names in the early 90's... same thing. do we really think those people deserved millions, in anything other than the most technical sense of the word?

i understand your argument about compensating for risk, it's not dumb and not outrageous, but i'd like to challenge it to some degree. hopefully it's fair to assume that risk is simply the financial risk, i.e. how much you could lose, and at what probability? in that case, would it be fair to say that any positive expected value investment would result in undeserved profits? in other words, wouldn't there be cases where the rewards outweighed the risks?

if we accept that narrow definition of "deserve", then i guess it would be my job to argue that the three categories i mentioned show an imbalance. or course, knowing true risks is impossible, but you might be able to make a pretty good case in some instances. but i really dont know enough to do that.

but, i think that formulation doesn't really fully resonate with the way most people intuitively judge desert.

six people ante 200k each, then roll a die. who ever had the number that is rolled takes all the money. does the winner deserve the money more than the losers? in that example, sure, i think most people would agree, its a game of chance and they all entered willingly. did he "earn" it? ehhh, i guess?

now what if six people go off and build houses for a year. at the end of that year, they get paid proportion of the sum of all houses value based how many sq feet of house they personally made? someone might build a really shitty but huge house. would they deserve their pay? "but the rules were pay based on sq ft"... well, sure, but the spirit of the rules? probably the spirit is to pay people based effort, skill and product, so as to incentivize them. so maybe a flaw in the incentives then? i realize this is meandering from my original point... but i think its on us to do the right thing, not rules to force us to. ok, anyway... i think in this case most people would probably say this person doesn't deserve all the money because the house they built is so shitty, and they just found a loophole and exploited it.

that is all just a very long winded way of saying that i think desert is based on more than explicit contracts.

Up voted for admitting it violates a perception of fairness - can't argue with that! To put it in stark perspective where I agree with your sentiment, if not in policy perhaps, note how rental prices skyrocketed in the depressed town of Williston, ND when oil was found and it became a boom town. These landlords are siphoning off an infuriating amount of this boon while adding little to no net new value for luck of having bought and held onto their deeds in that town which not long ago had been worth little. One might even argue that the men gainfully employed in oil extraction are better tenants than the people who scrape by in life when the town was depressed. But, even then, thesee landlords held out when the property was worth little; they took risk to maintain land and provide shelter when the town's prospects were dim rather than buy bonds, perhaps, or something else better diversified and with less risk than real estate.

If you don't rent, then you have to buy. Now you are paying money to the banks who "just rake it in". If you can't save up for the 5% downpayment, you have no choice but to rent. There will always be a percentage of people who don't have the capital to buy and need renting options. Note: I'm not saying slumlords are good. I'm saying people need to have a place to live. People need to have jobs. The economy will always have to encourage people who provide housing and jobs as it is so critical to everything.

It seems like you are most upset about people who inherited money using it to their advantage. I think the biggest problem is not poverty but how the middle class is forced to pay for it. The powers that be tell the middle class that it is the lazy poor people's fault so they get the blame while the rich get richer.

But housing only exists because of the economic incentives provided by the rent.

The act of building housing takes significant resources: lots of labor, purchase of physical building materials, purchase of equipment. The investor takes on the risk that pouring money into construction efforts will ultimately be paid back in the form of valuable housing that can be sold or rented.

If not for the returns provided by rent, no one would put up the investment in order to build more housing.

(just to clear things up, the act of charging rent is different than what economists refer to as rent-seeking behavior https://en.wikipedia.org/wiki/Rent-seeking)

i dont dispute that getting rich has motivated people. but its worth mentioning that houses existed before money, as have many other valuable things.

When economists talk about rents and rent -seeking behavior, that's somewhat different from the common meaning of "rent". So for example you can get a monopoly rent by having all your (smaller) competitors regulated our of existence even if nothing is being rented in the traditional sense, while a landlord renting out properties in a healthy competitive market won't receive any economic rent.

To the vast majority of companies, poverty is not profitable (prison industry and loan sharks being notable exceptions). In fact to most companies it is critical to have an affluent market to sell things to. It's just not profitable for them to be the ones ensuring that this affluent market exists rather than let it be someone else's problem. It's a classic tragedy of the commons.

If affluence itself is defined in its relationship to poverty, then yes, then making money off of affluence is in essence making money off of poverty. Any kind of market that plays to peoples sense of status is playing into class dynamics born out of the existence of relative poverty.

>In fact to most companies it is critical to have an affluent market to sell things to.

I think you may be describing what you see around you. Plenty of companies make plenty of money specifically because of people being in need. Think of all the fast food and microwaveable crap that gets sold simply because the buyer either doesn't have a good way to keep food or doesn't have the time to make a "real" meal as they get off of one job and have to go right to the next.

Or, in general, lots of cheap crap products that sell well because poor people are extremely price-sensitive and unable to accumulate enough money to buy a better (and in the long run cheaper) product.

Yeah, sadly, the reason things are often so expensive for poor people is because it ISN'T profitable to service them. This means that there is little competition for their business and things cost a lot.

For example, rent for poor people is way too high. So why don't other people come in and offer to rent to them for less?

Well, poor people have trouble paying their rent a lot of the times. They have a high chance of failing to pay, and that is costly to a landlord. So that risk is priced into the rent.

What this ends up meaning, though, is that if you are poor but always pay your rent on time, you are paying for all the people who fail to pay their rent.

The thing is, if you're the kind of person who always pays their rent on time despite being poor, you won't be poor for long. So the population of poor people ends up being self-selected for the personal qualities that lead someone to not pay their rent on time.

> So the population of poor people ends up being self-selected for the personal qualities that lead someone to not pay their rent on time.

For qualities? Yes. For personal qualities? I disagree. It's easy to imagine someone someone not being able to keep up with rent due to circumstances out of their control.

I can see it as a kind of potential barrier. Those who can cross it will rise from poverty. Those who can't get stuck in it.

That simply isn't true. There are a lot of poor people who live within their means, who do not go into debt and who do not miss rent payments. They simply don't make much money at their jobs, and they go without a lot of things in order to make ends meet. They live in cheaper housing, don't have a car, don't eat out, and go without luxuries.

They aren't suddenly going to stop being poor just because they are responsible with their money. Their job will continue to pay them low wages, and they will continue to stay poor but stable.

This isn't a character flaw to have a job that doesn't pay well.

Until they hit a crisis they cannot deal with given their meagre means.

This could be a health problem, workplace closing, unplanned parenthood, important item breaking... and way more.

Exactly. Same with interest rates on loans. If you have a bad FICO your interest rate will be higher because you're considered riskier. Higher risk, higher the reward that's how business works, generally. Business != charity.

Interesting though on the supply side question. I remember reading some comment here that basically said, People do not build low income housing, they build high income housing that then gets old and becomes low income housing. That means there is a several decade lag in housing supply for low income.

Could be fixed by central regulation but allegedly free market solves all problems by itself.

Not so, because of filtering... [1]

Adding new stock at the top makes existing stock more affordable. It's a gradient - not a age-based scale.

[1] http://cityobservatory.org/what-filtering-can-and-cant-do/

Payday loans. Check cashing. Rent to own. Overdraft fees, minimum balance fees. Interest on credit cards, late fees & fines. Debt collection. For profit prisons. Selling the same crappy built-to-fail cheap consumer products over and over again.

I think you underestimate that when you say "loan sharks" that when you're poor every bank and financial institution basically feels like a loan shark when you pile on all the fees and hidden charges. There's no escape.

The poor are a hugely profitable market where their poverty is used like a weapon against them.

This is an excellent book, but as other comments have pointed out, the review misrepresents its argument.

I wouldn't say Desmond is exactly sympathetic to the landlords he profiles, but he does provide a well-rounded picture of them. The main thrust of his analysis is that eviction is a major cause of an inescapable cycle of poverty, and that preventing eviction would go further to reduce poverty and inequality than nearly any other government policy.

IIRC his recommendations involve a huge bump in the federal housing voucher program, decoupling it from work requirements (since it's difficult to get a job without a permanent home), and tying federal aid to code reform in cities (simplifying and loosening the housing code so that landlords would be less likely to ignore it).

Those are great policy prescriptions: reduce eviction by giving poor people more money and more flexibility, as well as by making it cheaper and easier to offer housing to poor people. You're right that the article misrepresents that argument.

How does it stop everyone from just squeezing more?

Man people in this thread are really biting hard on the extreme straw man arguments. It is really pretty simple:

(Poverty is profitable for some people) + (Doing anything about poverty is not profitable for most people) + (Poor people are disempowered) => poverty

Sounds like it would depend heavily on what exactly the "some" and "most" are and how extreme the disempowerment is, and on how many people do things for reasons other than profit.

So no, not all that simple.

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance. -Rothbard

I'm seeing all sorts of economic flailing in these comments. Is it okay to make a reading recommendation? I think people who read them will have a better understanding of how economics actually works in the real world.

Economism by James Kwak

Economic Ideas You Should Forget by Bruno Frey & David Iselin

I would also recommend Wage Labour and Capital by Marx, and the classical political economists like Smith and Ricardo. A good introduction to contending schools of economics is Contending Economic Theories: Neoclassical, Keynesian, and Marxian by Wolff.

This video by CGP Grey, based on the book "The Dictator's Handbook" is very good at explaining why some countries are richer, even if they have plenty of natural resources: https://www.youtube.com/watch?v=rStL7niR7gs

Another view: https://en.wikipedia.org/wiki/Resource_curse

On the other side of the equation (at least regarding real estate), it can be difficult to make money from poor people without extremely low costs and tremendous scale.

There is a reason many landlords refuse to accept Section 8 tenants. It's not because they're evil Scrooges, it's that Section 8 tenants are more likely to damage properties (I've heard firsthand accounts of Section 8 tenants letting their multiple dogs piss and shit on the floor while refusing to pay several months of back rent and utility bills, and others letting their units turn into such trash heaps that delousing was a regular occurance) and vacuum up administrative time. So the rent has to be high for the landlords to be able to make a profit.

Maybe we could stop blaming the market for doing what it does and recognize that the economy and the livelihood of people is largely determined by government policy?

Bring back the Works Progress Administration. Pay people to show up and work. I know it's unrelated to the article, but as long as private employers have little competition for wages, poor people will continually be forced to accept their place in a race to the bottom.

I agree 100%

The article (I'm not sure about the book) painted landlords as evil for evicting women "Think of that next time you ask a woman why she doesn't call the police," but Crack doesn't come out of walls easily, holes punched in by that abusive man aren't fixed for free, and cops making an arrest care even less about your property than the tenants. There are insanely high cost to renting to low-wage families and most landlords I know that attempted it didn't last long doing so.

Are there some sad stories of people truly trying to improve their lives? Yes, there absolutely are, but for every "Pursuit of Happyness" Oprah level story of overcoming poverty there are 20 people who've absolutely given up and don't give a crap about anything that's not physically attached to them. It's not the business owner's responsibility to try and spur the human spirit of the impoverished.

This article is painting just a skewed of a viewpoint as the one it's trying to disprove, and I'm curious if the book is the same.

To affirm your anecdote, I had a friend who bought a fourplex in a somewhat depressed area, lived in one unit and rented the other three. It was an unmitigated disaster and a terrible experience. I spent some time with him trying to help out around the units and also discussed his experiences with him. I concluded from that I would never, under any circumstances, want to be a landlord.

I'm iffy on this book but I think there is a very interesting point/perspective to be made on the profitability of housing. It's expensive, and it's that way because of economics, mostly. People will charge what the market will bear. I am renting out a house in Atlanta, and I've decided I would rather have stable, good tenants, over profits. The apartment communities I've lived in are the other way around: profits over tenants. Each year apartment rates go up for most people. They never go down. Even if they did go down, they wouldn't go down for the tenant, they would go down for a new tenant. What we're seeing in places like California, Portland, Seattle, and other dense, urban areas with limited housing, is that people are being pushed out because of ever increasing rent prices. So yes, I do think that housing is high because it's profitable, and I think something should be done about that. Unfortunately I don't have an answer. I don't think it's "build more" because that will just lead to more of the same.

I don't buy it. Increased wealth at lower levels benefits everyone. The main problem of poverty, at least in America, is that the welfare system traps poor people in government dependency. Another massive issue, homelessness, is due to terrible mental health treatment, which is especially sad.

Things that benefit everyone can still be worked against. Ever heard of a prisoner's dilemma? Yes, everyone would be better off if the poor did better. But each individual corporation and service provider interacting with them is individually better off if they extract as much as possible and leave people worse off. Not because they specifically want people to be worse off. But because extracting as much value as possible from the customer is in the provider's interest. And incidentally leaves the customer worse off.

Keeping people impoverished is a local maximum, not a global one. Yes, we as a people would be better off if we enriched the poor (this is why the middle class is so valuable). But it is in the interest of every corporation to make maximum profit (that is, part people from the most money possible) and make people poorer in the individual case.

I.E. banks benefit from cycles of debt (mortgage, credit card). It would be better for everyone, including the banks, if the poor were not put in cycles of debt and allowed to become wealthier. But the most profitable thing for a single, individual bank to do is issue predatory loans.

>I don't buy it. Increased wealth at lower levels benefits everyone.

That's irrelevant, since it's not "everyone" who decides, but the corporate elites and rich players.

So if "Increased wealth at lower levels benefits everyone" but "decreased wealth" benefits them, they'll push for that. They also don't much care for long term effects -- short term gain is enough (they can always retire when the economy/society falls apart, and they don't have to mingle with the lower classes or send their kids to their schools etc, unless they want it).

Welfare is a typical bugbear of conservatives and libertarians. As someone who has spent most of my life below the poverty line, and never been on welfare, I just can't see it. There are dozens of other huge factors. I agree completely about the mental health system, though. I'd rate that as one of the huge factors.

Totally disagree. Do you think pawn shops, payday lenders, and high-interest credit card issuers would benefit if their customers became wealthy enough to not need their services?

Payday lenders would probably (thankfully) go away, but other businesses could benefit. Credit Card issuers will do well. Interest rates go down, but credit limits can go up. A pawn shop makes money selling stuff, so if there was more money in the neighborhood, they could sell more. They may need to acquire products in new ways, and rebrand as an antique store, or general store.

Unless I've misunderstood all these years how pawn shops work, they would indeed have trouble operating under the same business model as average wealth in their area increased. Resale shops and such would be fine, but the difference is that they don't sell stuff they've acquired when people defaulted on what amount to short-term secured loans.

Yes, they'd have to change their product acquisition methods, but at their core they are basically used goods resellers, and that can work just as well as a wealth increases.

Right, but then they're not a pawn shop. Payday loan places would do fine, too, if they turned into traditional banks.

It's a much bigger step for a payday loan business to turn into a bank (basically impossible due to regulatory barriers to becoming a bank), than for a pawn shop to switch suppliers. Look at it this way, when people move out of poverty, their need for payday loans goes down, but their ability to buy stuff goes up, so a pawn shop has some potential to capture the increased purchases.

I patronize the local pawn shop all the time. I don't need to, but it's a way to easily sell things I no longer need, and buy things fairly cheap. It's a great place to pick up an inexpensive laptop, for example. I bought my favorite e-reader there.

Every pawnbroker and payday lender would rather be a venture capitalist or a private banker. Every shady used car dealer would rather be selling Bentleys and Lamborghinis. Every trailer park owner would rather have a portfolio of Manhattan property.

There are market opportunities in doing business with the poor, but none of them are particularly attractive.

Do you state that based on evidence or ideology?

I don't think it's true, any more than it's true that every worker wants to work at whatever job hapens to have the highest salary. People are not fungible seekers of maximal profit.

If you are a political party that champions the poor, it may be in your interest to keep people poor so they keep voting for you. I.e., look like you are helping, but don't actually help.

> Increased wealth at lower levels benefits everyone.

Both the positive and negative experiences of wealth/poverty are driven largely by relative, not absolute, material situation, so this is not really true, as much as those who think that absolute material conditions should be the driver of utility think it is.

> The main problem of poverty, at least in America, is that the welfare system traps poor people in government dependency.

That was the theory beyond the welfare reform of the 1990s, which created new limitations, etc. It was quite successful in getting people off welfare (and pretty good at keeping them off, with caseloads not increasing much with the downturns that followed in 2001 and 2008), but far less successful at keeping people out of poverty (beyond the declines during the expansion the reform was passed in the middle of.)

> Another massive issue, homelessness, is due to terrible mental health treatment, which is especially sad.

You probably need to decide if the problem is too much or too little public support, since you've in effect argued both positions in the same paragraph.

There are people who are looking at the world and seeing how they can make money, but the more you make the more you can afford to pay, so in general capitalist prefer people to be rich.

> in general capitalist prefer people to be rich

I'm not convinced that this is true.

Poor populations allow for is the cheap accumulation of power - people who have less are easier to motivate with an offering of money or support. If you increase the distribution of wealth amongst the population buying that goodwill and loyalty becomes a lot more expensive.

This power dynamic can be seen demonstrated in the dissemination of living assistance by profit-motivated groups that wish to accumulate political and social power such as organized crime.

UPDATE:

I'm leaving the old post as a historical reference but I wanted to take a second swing at explaining my disagreement coherently.

The time and efforts of a person is a commodity and the price of that commodity is partially pegged to the accessible wealth of that person. As the average personal wealth of people increases the cost to purchasing their time and efforts increases.

There are two ways to increase profit - increase the cost of the product or lower the cost of production. Increased average wealth helps with the former but (depending on how manually intensive your product is) decreased average wealth helps with the latter.

> in general capitalist prefer people to be rich.

Capitalists prefer to be rich themselves (both absolutely and relative to others in society), and they prefer labor to be cheap, which is served by laborers being poor and insecure.

Rich customers, poor employees.

Not only that: poverty ensures a steady supply of cannon fodder for the military. So there is a big %age in keeping people poor if you want to have a large military.

That doesn't match recruitment data for the US Army. We have a volunteer professional military with standards for recruitment that require above average individuals.

There are still plenty of poor people in the Army, quite frankly I can't think of anything better for poor people. Where else can you get housed and fed and your college paid for? Only a small portion of the military is war fighters. Most are doing boring relatively safe jobs like filling gas tanks and counting bullets.

> We have a volunteer professional military with standards for recruitment that require above average individuals.

Those could easily be poor. Poor != dumb.

> There are still plenty of poor people in the Army, quite frankly I can't think of anything better for poor people.

How about a normal civilian life?

> Where else can you get housed and fed and your college paid for?

In countries with a functioning social contract this is not an issue.

> Only a small portion of the military is war fighters. Most are doing boring relatively safe jobs like filling gas tanks and counting bullets.

Right, but they're still part of the same machine and even if the %age that ends up on the front lines is not 100% that holds true historically. So that's not a counter argument, it's just a function of how the military is organized.

Note that 'volunteering' if it is your only option at a reasonably affluent life is not really volunteering.

Compare and contrast: http://www.businessinsider.com/check-cashing-stores-good-dea...

Ain't no "what if" about it son. Every economic transaction between two parties benefits the seller slightly more than the buyer; that is the definition of profit. Sure, the buyer is getting whatever good or service they paid for, but they are ordinarily paying slightly more than it's absolutely worth.

If that element isn't present (i.e. if the transaction does not incrementally impoverish the buyer and enrich the seller by some amount), the seller won't continue to sell that good or service.

Edit: except non-profits, subsidies, and Uber

The buyer and seller both profit, or they would not engage in the trade. Each has something the other needs more than they do.

I agree and I acknowledged this ("the buyer is getting whatever good or service they paid for"). But I still tend to frame it as the buyer having incurred a cost, not having profited. The seller is the one who ends up with money in hand, that can be invested elsewhere. The buyer usually ends up with something that either starts off with no resale value, or that depreciates, or that (if you're poor) does nothing but keep you alive -- like a roof over your head let's say.

Mind you, since that last category consists of things one really needs a lot, it makes one that much more eager to engage in the trade and pay the stated price. If you can afford to walk away from a negotiation, your position is a lot stronger.

Consider the farmer and the blacksmith. The farmer makes more corn than he can eat, and the blacksmith shoes the horses. The blacksmith trades shoeing the farmer's horse for corn to eat.

They are both better off. There is no buyer/seller.

Money is just a medium for making trading more efficient. A "buyer" and "seller" is an artificial construct, and framing things as the "seller" always gets the upper hand has no real basis.

I buy things and sell things all the time. It's pretty clear that the seller has no inherent advantage.

In barter there is no seller's advantage because yeah, there's no seller. In a monetary transaction, there is, because one party ends up with money, which is more than just a medium of exchange - it's capital. You can easily rent it out and get back not only your money, but a bit extra. You could do that with corn, too, but you would have to set up the arrangement yourself, whereas the mechanisms already exist to do that with cash.

It is just a medium of exchange. It's all money is.

I doubt I'll convince you with rhetoric, so I suggest you try doing a little selling. The experience should be pretty convincing that it doesn't give you any advantage.

Well this is funny. Believe it or not, my attempts to sell something nobody wanted are actually the very thing that made me think the way I do. I had something I couldn't find a buyer for -- something specific with only as much value as any buyer would care to assign. But my potential customers had something everybody wants including me -- a medium of exchange as you say, that can be easily converted into anything else. Selling is harder than buying because what you're asking for (people's money) is more flexible and reliably worth something to a greater number of people. If you find a market, a bunch of people who want what you've got, more than they want money, you've scored a coup!

The buyer of labour-time pays wholly for the labour value provided, but the worker in turn provides surplus labour which the capitalist collects as value. The worker is paid for the the time that the capitalist has purchased, not the surplus. The worker does not "profit" from this; the worker must work in order to survive.

The worker sells his labor for profit because the money is worth more to him than his labor.

If you are forced to do something in order to survive, would you say this is profitable? The worker must sell his labour time in order to survive. If this is how profit is defined, then so be it - but it is a very strange way of "profit" if your profit is that you get to live.

This also does not address the surplus labour issue, in which the worker is not and within capitalism cannot be compensated for the additional labour, for if he was then the capitalist, even in a system of equal exchanges between the capitalist and the buyer, would not be able to make profit.

The blacksmith cannot eat iron, and the farmer cannot grow corn to eat unless his horses are shod.

Does that make their trade of extra corn for horseshoes unprofitable for both of them?

If the transaction didn't also benefit the buyer, they wouldn't voluntarily enter into it. If I have a dollar but would rather have a soda, buying the soda makes me slightly better off. I might prefer a free soda, but I'd still rather have the soda than the dollar. If I perceived the soda as being worth less than a buck, I would have kept the money. There are a million other things I could have done with my dollar, but I chose to exchange it for a soda; that simple choice reflects a profound truth about the market.

Nothing is "absolutely worth" anything. The same bottle of soda is worth 25 cents at Costco and $4 at a ball game. It's up to the customer to decide whether the product is worth the price it's being sold for.

See my reply to WalterBright below. The transaction absolutely does benefit the buyer. But it benefits the seller more. What you're left with (a soda), you consume and it's gone. What the seller is left with, he can invest (essentially renting it out) and turn into more money.

Something good I could say about the soda is that it's 200 calories that keeps you alive a couple hours longer, and you have a chance to make some money in that time. So it might be a good investment. It's not black & white. Or a car (a cost you incur) that enables you to commute to a job you couldn't otherwise reach, that kind of thing comes close to an even benefit.

Edit to clarify: What I'm thinking of as the "absolute worth" of a good or service, is basically, "exactly the cost of providing it." If you provide everything "at cost" then you are making zero profit. Agreed that market price/supply/demand/etc. may dictate that you make more (or less) than that.

It really depends on who's more desperate for the sale to happen. And it can be either side. For the most part, both sides gain. In extreme cases someone can feel forced by circumstances to either sell or buy.

Right, this is the same as the welfare trap. Keep the poor reliant on state largesse and count on their votes. Its still exploitation.

Hmm, indeed, "what if".

Poverty is certainly profitable for politicians.

Of course poverty is profitable.

Because providing goods and services to poor people is evil!

> Tobin Charney makes $400,000 a year out of his 131 trailers, some of which are little better than hovels.

That monster! Charging about $3,000 a year in rent per trailer! Of course his actual return is lower than that, because he has to pay for the mortgage and taxes on the underlying property, as well as upkeep. Say say more like $200,000. But still! Earning about as much as a programmer managing a business that houses over a hundred people. Monster is the right word for sure.

Man, I really, really like your posts--but come on. Nobody is saying that providing goods and services to poor people is evil. They're saying that there are capitalistic incentives to keep a poor population captured and that those outweigh the comforting-but-probably-pretty-wrong "just lazy" excuses.

I am perhaps more disappointed in an internet name than I should be, but I am disappointed. You are better than this.

The capitalist system writ large would much prefer that these people made $40,000 a year instead of $20,000, because then it could sell those people iPhones and whatnot.

I'm being glib, of course, but that's because there is no rational point to be made here. There are almost zero barriers to entry to businesses that provide goods and services to poor people. Buying a trailer park requires extremely little capital investment. Thus, there is no reason to believe that the pricing is predatory. Instead, the article is trading entirely on the ickiness (some) people feel about running a business catering to poor people.

I think limited housing options for poor people is a big problem. But it's not a problem created by business owners providing housing to poor people (or ones evicting poor people who cannot pay). It's a problem created by state and municipal governments that make it illegal to build dense housing, housing on small lots, housing that isn't to code, etc.

> The capitalist system writ large would much prefer that these people made $40,000 a year instead of $20,000, because then it could sell those people iPhones and whatnot.

Only if the marginal cost of getting there is outpaced by the marginal return. If that wasn't the case, no volume-but-cheaper business could work. When you can have a ton of poor people, they are an exploitable resource for people who aren't selling iPhones (and if you pay attention to the description of eviction as a social problem maybe you'll catch a little more of the "exploitable resource" part). And it's nothing surprising--the historical examples abound of captive, poor populations who are used as revenue generators with no real recourse of their own. I get nothing out of the article that's "trading entirely on the ickiness" of selling goods and services to poor people. But I do get a lot of "poor people have basically no options because of systematic economic incentives to keep them there."

> But I do get a lot of "poor people have basically no options because of systematic economic incentives to keep them there."

Poor people might not have good options, because they have no money, but they have options. If the check cashing place on your block charges too much, you can go to the one down the street. The barrier to entry in these markets is so low that there is no argument that they are "gouging" customers who have no other options.

...Dude. The usurious, bullshit check-cashing places are one of the parts of the system that profits from keeping poor people where they are. The charges at all of them are effectively too much to not be a severe burden on folks who are too down to afford a bank account. You're not covering yourself in glory here with this sort of lack of empathy.

If banks could make a profit giving poor people bank accounts, they'd do it. Moreover, there is tremendous competition in the check-cashing market. Walk down a street in Baltimore and you'll hit one every few blocks. If one of those shops could get more of the market by charging lower fees than their competitors, they'd do it.

Focusing your ire on check cashing places is the archetypal example of a bullshit solution crafted based on emotions rather than rational analysis. Forcing check-cashing fees below the market price is just going to reduce the number of check cashing places, taking away options from people who need them. Any real solution is going to either require the government writing a check e.g. by subsidizing bank accounts for poor people, or reducing regulation to lower the transaction costs in check depositing and withdrawals.

Again (maybe I can say this more succinctly):

These are businesses that survive by making lots of irresponsible loans to people who have no business taking out loans, funding them out of the enormous fees and interest payments charged to the subset of their customers who aren't total write-offs.

The "capitalist system writ large" might prefer it, but entirely too many individual capitalists — that is, the folks with, give or take, all of the capital — probably prefer things more as they are.

Which, I believe, was the article's point.

EDIT: phrasing.

Except the small potatoes capitalists mentioned in the article have zero control or influence over the larger political system.

Yeah, your reading is very different from mine, also.

You're assuming things about the liquidity of the market, regulatory environment, and external situations that simply aren't true. Toy models can be useful, but don't take them for reality. The point of this article is to tear down simplistic assumptions like yours. I guess it failed.

Any time you say "this can't be true, because otherwise..." you had better take a hard look at your mental model and 1) make sure it's saying what you think it is, and 2) is backed up by evidence, not just an idealized version of the world. I think politics and economics are most bedeviled by these simple models, which tends to elicit this knee-jerk kind of response.

The article does absolutely nothing to "tear down simplistic assumptions." For example, with respect to the trailer park. The article says nothing about the guys return on investment, which you would need to know in order to determine whether he was earning some sort of abnormally high return by having a captive audience. The article also talks about the unfortunate situation faced by people who are evicted, but says nothing about the kinds of returns earned by those landlords.

And studies have looked into this issue and confirmed the view I expressed above. For example, studies have found that competition in the payday loan market is intense. Interest rates are high because the default risk is high, not because people don't have choices between lenders that compete on interest rates.

I'm not sure what point you are making. Even if competition in the payday loan market is so fierce that there's zero margin, it still remains that the rates will be high enough to help trap people in poverty, and having people need to take out payday loans is the solution the capitalist system has devised for this situation.

To pretend that this is not a failure of the capitalist system seems very narrow-minded.

The folks attacking payday lending (i.e. mainstream American liberals) aren't suggesting replacing those options with minimum basic income or a comprehensive welfare state. They're simply ignorant, and think that poor people will be helped if the government sets lower rates by fiat. In reality, it will simply remove another option from people who have very few.

Well, I am attacking payday lending, and I am for replacing it with a comprehensive welfare state.

I don't know if I'm a "mainstream American liberal", I'm barely American, but maybe it would behoove you to be a little more open to the fact that maybe you don't in fact know what everyone else is thinking and whether they are ignorant or not.

That's great, but I wasn't talking about you. I'm talking about the mainstream American liberals (i.e. the main constituency of the Democratic Party), which is pushing for heavily regulating payday lending but certainly doesn't embrace a European-style welfare state or basic income.

> The folks attacking payday lending (i.e. mainstream American liberals) aren't suggesting replacing those options with minimum basic income or a comprehensive welfare state

"Mainstream American liberals" would love to be pushing for a comprehensive welfare state more aggressively except that they are then beset upon with screeches of the socialisms and the death panels.

But we are pushing.

Well, hold on. I'm familiar with the libertarian argument in favor of deregulated payday lending and I believe the figures that suggest rates are high because default rates are high.

But the actual product being sold might be harmful, in the same sense as cheap revolving credit can be. The availability of payday loans leads to bad discretionary spending decisions (not just "flat screen TV" bad, but "accepting financial risks that are best not accepted" bad) which leaves people trapped --- and then you start getting interested in how much the returns in the payday loan business are subsidized by poor people who made understandable-but-ill-advised financial decisions and are now trapped under fees and interest from a payday loan.

Your points about low-income housing are well taken. But I think the comparison to payday loans, and the subtext that all services offered to poor people are intrinsically beneficial, kind of falls apart.

There are other problems here too. For instance, we tend to believe that renters are have worse upkeep incentives than owners, who directly benefit from improved property values. Similarly, people who let out trailers to the poorest people in society may also disincentivize upkeep. After all: they've pegged their business to the very bottom segment of the market. That's a real market phenomenon too: "the race to the bottom".

> In reality, it will simply remove another option from people who have very few.

Their argument is that this is a good thing, because taking a payday loan is usually not a rational economic decision, and therefore overall welfare is improved by forbidding people who stand to lose a lot from poor economic decisions from making those decisions. It's the same logic behind investor accreditation requirements.

Now there are legitimate arguments to the contrary, like some of the ones you've made upthread. But let's state both views accurately.

>The capitalist system writ large would much prefer that these people made $40,000 a year instead of $20,000

The captialist system finds local maximums, not global ones. This is a classic coordination problem. As a business, your path to profit maximization from poor people is to keep them impoverished (make the poor part with the most money possible).

Of course, if every business adopted models that were less predatory, overall wealth would increase, poor people make 40k a year, more stuff is sold, and everyone profits more, poor and businesses alike.

But as a single business, if you adopt less predatory business practices, you are not maximizing profit, AND you are opening yourself to be out-competed by a business that does.

The regular customer-satisfaction competition does still apply, of course. But the power of the consumer is significantly blunted if the consumer has limited choice, which is what happens to the poor when they have limited options caused by low economic security. Perhaps, the poor have so few options, businesses are allowed to create predatory cycles of poverty.

> But it's not a problem created by business owners providing housing to poor people (or ones evicting poor people who cannot pay). It's a problem created by state and municipal governments that make it illegal to build dense housing, housing on small lots, housing that isn't to code, etc.

I concur -- awful zoning laws are a root cause of the undersupply and overpricing of housing for poor people. Criminalising the sheer act of dwelling (or renting to people who dwell) in any sprinklered building is utter depravity, especially given how many people are homeless or live in warehouses that are deadly firetraps.

However, currently-existing residential landlords/property-owners have extremely strong reasons to preserve the currently-existing legal regimes that limit housing supply. After all, if it suddenly becomes legal to {build,live in, rent out} dense housing / housing on small lots, there'll be people who indeed will do so, which will increase supply and lower prices.

That's the profitable element in the current state of affairs -- all the current landlords who can charge higher than they would be able to if the government wasn't making lots of potential competition illegal.

Any stupid theory can outweigh the comforting lie of "just lazy", but that doesn't mean we have to reduce our skepticism.

The people who rent trailers to poor people would probably make much more money building nice houses and renting to richer people. It could be that one of the reasons poor people have so few affordable options is that people don't profit from serving them.

The article does nothing to argue against that possibility. It doesn't even acknowledge any alternative theory that could explain the same data, except the "just lazy" strawman.

That's a pretty poor way of expressing the idea of the article.

The point the article is making is that poor people often have their backs against the wall as far as the number of choices they have in food, housing, jobs, location, etc. They're effectively a captive audience, which makes them an easy population to exploit. Maybe this is considered acceptable in society's economic model, but at the least people should be more aware of how your options fall away as you go further down the socio-economic ladder.

This may be the book's point, but I don't think it's the article's. The author's claim that "the problem is that poverty is profitable" only makes sense if one believes that those profiting from the poor (like the landlords mentioned) are somehow responsible for their poverty.

Yeah, fair. The article editorializes and seems to advocate for more culpability on the people delivering the services. Which feels a little short-sighted, since poor people wouldn't necessarily be any better off if they didn't have these services at all.

> Maybe this is considered acceptable in society's economic model, but at the least people should be more aware of how your options fall away as you go further down the socio-economic ladder.

What rational person would expect your options to improve as you drop down the economic ladder? Less money, mo problems.

The only situation I've seen where that's remotely true is applying for student aid where if you're parents saved money they're expected to pony it up, but if they spent it all on flat screen TVs and new cars (and hence are "cash poor") they're not expected to do so.

"The only situation I've seen where that's remotely true is applying for student aid where if you're parents saved money they're expected to pony it up, but if they spent it all on flat screen TVs and new cars (and hence are "cash poor") they're not expected to do so."

Are you suggesting that everyone falls into this (false?) binary?

I do. I saved for my kid's education, and I didn't bother even applying for aid, because (a) I don't need it, (b) I wouldn't get any, and (c) it's not anyone else's responsibility to send my kid to college.

I applaud you for having the foresight to save up for your kids' education. At the same time, I think it's naive to say that the only reason people are cash poor (or even the primary reason) is because they buy flat screen TVs and new cars.

It's not that everybody falls into those two categories but if you're a middle class household and sock your money away rather than spending it as disposable income (TVs, toys, cars, vacations, steaks, ...) then you're expected to spend it on your children's education.

I find it stupid because it disincentives saving and being responsible.

I don't think anyone necessarily expects that less money = more options, but I don't think people realize how many options you lose as you get poorer. The way that people talk about poverty, people seem to think that being poor is needing to tighten your belt and be more frugal and creative, maybe not getting an iPhone, maybe downsize your house.

The reality of the situation is a bit less glamorous than that, where you can't actually find standard housing at all because of lack of credit and consistent income, resulting in needing to stay at motels for the long-haul (for example). This higher proportional cost puts a pretty severe strain on your cash-flow, maybe meaning that you have to optimize for getting money NOW, instead of two weeks from now. Being unable to get to a bank regularly means you either have to carry cash on-hand (which makes you a target) or you have to use check cashing services and other value storage methods (which provide poor return).

Being poor isn't just like cutting costs and expenses, it's in fact an entirely different game from making ends meet for most middle-class people.

> I don't think people realize how many options you lose as you get poorer

What is poverty if not a lack of options? Who do you think misunderstands this, and what do you think the misunderstanding is? What sort of misunderstanding would cause nearly everyone to spend the majority of their time avoiding or escaping poverty?

In my experience, the people who are typically accused of "misunderstanding the relationship between poverty and options" are simply wary of schemes which seem to incentivize behaviors that lead to poverty.

I don't think the problem is that people "misunderstand" that notion. I think it's that people who've never been that kind of poor don't — can't — appreciate how few options the people who are actually have, or how much more expensive those options are (not just in terms of the marginal utility of the poor person's dollar, but that things are often objectively more expensive) when you're that poor.

It's a subtle distinction, but it's absolutely real.

> Who do you think misunderstands this

"Poverty bad, avoid it" is not the same thing as understanding "poverty is a sand trap that becomes nearly inescapable because of otherwise run-of-the-mill incidents that are survivable at higher levels". The former is widely understood--but, frankly, I think the latter is not just misunderstood by actively denied by a large portion of...say...the HN commentariat, for reasons at best selfish and at worst ideological.

> poverty is a sandtrap that becomes nearly inescapable

This is different than the original post, which was that it limits your options. I'm also far from convinced that the majority of Americans or HN readers would have a hard time articulating why poverty is dangerous. To be clear, there's a difference between denying the legitimate hazards of poverty and criticizing certain social policies or attitudes.

> spent it all on flat screen TVs

Flat screen TVs, like most consumer electronics, have gone down in price over the years: http://thewirecutter.com/reviews/best-4k-tv-on-a-budget/

You're assuming the author is reporting gross receipts, which he may well be. But your back of the envelope calculations aren't convincing, particularly given your tone.

("Monster" is your word. The text, which I've now heard excerpted on the radio and in this article, is painting a considerably more complex picture.)

I am because I googled first to confirm average trailer rent is $200-300 per month, which is consistent with the number in the article.

It would be even higher, if there where bigger handouts. Why not put a rent limit for "poor" peoples property size and location?

So he's charging $250/month rent per trailer. That sounds very different from "making $400,000 a year". The second sounds like exploitation; the first sounds very close to charity.

This hinges a bit on whether "making $400k" means revenues or profits.

I know. And that landlady that had enough money leftover to take a yearly vacation and attend real estate meetups for professional development! "Monster" may be too generous.

If anyone here thinks you can take investment and usury out of any economy, I'd highly recommend David Graeber's book "Debt: The First 5000 Years". Totally viable, assuming we all go back to hunting and gathering.

One way or another, the poor need to be able to afford the basic necessities in life, housing included. Making anything that vaguely sounds like "rent-seeking" illegal is not going to fix it. How will anyone retire if dividends are illegal? Do we go back to a communist system, where you're required to work for government (benevolent, of course) for a fixed number of years? Where will the money come from to invest in a trailer that's "squalid"?

Competition is more than just another store offering the same goods and services at the same prices.

I'm flabbergasted at these comments. You are as out of touch as a republican supreme court justice. Willfully out of touch even.

I quite agree with your first line, but downvoted your comment for the second line. That's personal commentary, and HN strives to keep discussion at the level of ideas.

HN strives, but fails. The quality of posts has massively declined over the last 5 years or so. One more for the pile.

However, another commenter does make the same point but worded better: The person I'm responding to is over-generalizing toy models to the real world, then demanding that it's the world that is wrong, not them. It's a common reasoning fault in humans, and also one that seems to be common to republican supreme court justices. The insistence that the toy model of the world is appropriate, and applies and holds true even in the face of evidence that it is not.

Along with personification of systems, as if a system has a conscious mind. eg: capitalist system writ large prefers people to make 40k a years, rather than 20k a year. Not only is this a unsubstantiated remark, it's even false, since we have a ream of evidence that our American capitalist system, writ large, does not seem to be good at turning 20k earners into 40k earners.

Anyways, I wasn't even referring to any specific person, republican supreme court justices is a group of individuals, and not a single person in specific.

Please help me understand how, "You are as out of touch as a republican supreme court justice. Willfully out of touch even." isn't somehow about 'rayiner, personally, given that it was said in response to his comment.

When I say "HN strives", I'm not talking about some sort of intentionality on the part of the community as a whole. That's not even a point worth debating (in this context, at least, though it might be fun after we've passed a joint around a few times...). I'm talking about every one of us, individually, and our specific contributions to the level of discourse here.

When you say "HN fails", you're therefore saying you failed (for the specific, situationally appropriate value of "you" — in this case, you, specifically). Especially when you follow that with "One more for the pile." Being all, "Welp!" in the face of the degradation of discourse you complain about makes you part of the problem, not part of the solution.

Personal attacks are not allowed here. We ban accounts that do that and it looks like you've done it before, so please don't do it any more.

Re downthread: Whether or not comment quality on HN has "massively declined" (such perceptions tend to be in the eye of the beholder), please don't make it decline more massively still. "One more for the pile" is the credo of a litterer.

We detached this subthread from https://news.ycombinator.com/item?id=13924820 and marked it off-topic.

It's wrong to flippantly point to competition being the solution in every case, but it's equally wrong to dismiss the explanation without some reason to believe competition is not working. The microeconomic statement that competing sellers push price to margin cost is extremely well documents. To the point where if you're asserting that it isn't happening, you need to be able to point to some reason why.

“Crystal and Trisha are fragile young black women whose upbringing was violent and chaotic; Lamar is a genial black father of two who lost both his legs to frostbite when he passed out on crack in an abandoned house; Scott is a white male nurse who lost his licence when he stole opioids from his patients; Larraine, also white, is a slightly brain-damaged sweet soul.”

clearly examples of poverty caused by rich-people oppression

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