"There are no causes of poverty. It is the rest state..." | Hacker News Reader

"There are no causes of poverty. It is the rest state..."

adamsmith.org

56 pointstheoneill55 comments

The question is not what creates wealth but what keeps it unevenly distributed.

There have been experiments (computer simulations) that tried to explain 'Pareto distribution' -- a power law distribution of wealth leading to 20 percent of population having 80% of the wealth. I refer to 1996 Axtell and Epstein book (google for Sugarcape).

Basically, they created a number of software 'agents' and placed them on a landscape full of resources. Each agent possessed a 'fitness function' that controlled its further survival. Having access to resources improved the fitness function since the agent could replenish its energy and could go on hunting for resources having some surplus for the rainy day.

What transpired from the simulation is that 'the Rich get Richer' axiom is basically true. First generation agent might have stumbled on a resource nearby by accident. It has improved its fitness function and he was able to successfully compete on the next round.

Meanwhile similarly fit agent who had bad luck in the first round (no resource nearby) was left chronically under-fit and his chances of 'making it to the top' diminished with every round.

This piece of empirical knowledge makes two important points about the society and the wealth.

Firstly, even in the free market society people always have unequal opportunities because this is an emergent quality of the system, not the result of some corruption, inability, personal passivity etc. The best and the brightest will stay poor unless they stumble on a resource which is not taken. (A new internet business idea for example).

Secondly, revolutions have their merits. They re-shuffle fitness landscape. Even when people do not directly 'expropriate' somebody's wealth by simply levelling the playing field revolutions create competing chances for the talented and the hard-working who would otherwise be forever destined to be relatively unfit comparing to those who already have access to resources.

Looks like extreme pro-market views are as primitive as extreme 'left' views. Social science really becomes fascinating when aided by computer science, doesn't it?

"The best and the brightest will stay poor unless they stumble on a resource which is not taken. (A new internet business idea for example)."

Where does this data include for the fact that resources have been forcefully extracted from certain people groups for centuries?

Need not look further than look at Central and South America, and the entire sub-Saharan African continent. (Also of course, several areas in Asia)

it is no surprise then, that the wealthiest nations and societies are those who extracted the resources (in this case ranging from gold, diamonds, oil, rubber, ivory, even crops such as fruit, coffee beans, and cocoa beans) by means of blatant corruption, deceit, and thievery.

Secondly, many have remarked on this site that ideas in and of themselves don't have much value -- it is the execution on the idea that makes it powerful.

That being re-hashed constantly on this site, how then does a new internet idea count as a resource? Without the ability, or the actual resources to execute on the idea then there is absolutely no value of that idea to the person. (say, if a poor person has little or no access to a computer or the internet, it seems a bit ludicrous a new internet business idea is a resource)

"First generation agent might have stumbled on a resource nearby by accident. It has improved its fitness function and he was able to successfully compete on the next round."

Not by accident, but by intent.

The Sugarscape models are interesting because they show that you are likely have a "rich get richer" accumulation even when there is no coercion.

point taken, but surmising about how a society would operate in a fictitious world is a bit pretentious -- what real world value does that create?

Short blog entries on complex topics most often won't tell the entire story. There's more on getting out of poverty than not resting or asking the wrong questions. This is not about dumb wealth redistribution but social institutions and technical infrastructure. Instead of such intellectual fast food better one reads something useful like the (free) first chapter of "The Birth of Plenty": http://www.efficientfrontier.com/ef/404/CH1.HTM

After that one should look for 'new institutional economics' and 'complex adaptive systems' to better understand how social institutions, path dependencies, and (general) environmental conditions drive or constrain a society and how that influences social stratification and mobility (and indirectly poverty).

This posting isn't meant to be an arrogant indoctrination. But saying "there are no causes of poverty" is simply (and sometimes fatally) wrong. But to understand this one should switch from polemics to empirics.

It even has some direct relevance to hackers: Being busy and producing something other people want is not enough to generate wealth. When you think a supporting social and technical environment has no influence on the probability of success, then go and try to run your startup in (obviously restful) North Korea.

He's half correct. Poverty is the rest state, but there is significant artificial inertia in many parts of the world keeping people from accelerating beyond it.

It's hard to understand this when you live in a first world nation. We have that problem but to a very minor degree relative to much of the world.

If I were a criminal defense lawyer, murder would cease to be a crime. After all, there are no causes of death; it is the rest state, that which happens when you do nothing ...

In fact there are plenty of causes of poverty -- war, corruption, disease, overpopulation, debt, ecological destruction, etc.

Good point. Wealthy people are often impoverished by those.

The correct analogy would be suicide -- stop eating, drinking, and breathing, and you enter the "rest state"

Murder, because it involves another actor, misses the point.

That is, unless you believe that some people "make" other people poor during the course of regular life -- an odd and unsupported statement.

I would agree that there are plenty causes of people losing what they own. Seems to me, however, that no matter how much money you have, you cease to be poor once you move beyond looking to external actors for the source of your internal pain. Or perhaps that statement is a bit too Zen for the board. Dunno.

The murder suicide analogy is perfect, both end in death (poverty) but you can get their either by youself (suicide) or by the actions of others (murder). Calling poverty a rest state is to ignore all the outside forces that can be impairing a persons ability to create wealth. You can indeed make other people poor, and its not always a crime to do so, nor require them to be complicit in it. I think most people here find some truth in the idea that food aid makes farmers in developing countries poor.

I would suggest we be careful with definitions here. Certainly certain policies impact certain jobs. My grandfather was a farmer. That is, until the economy changed. Then he wasn't a farmer any more.The policy may have had negative impacts on farmers, but it could only have a very limited impact on my grandfather.

I would also distinguish between "making somebody poor" and "poverty", which is a state of existence. Likewise, I would also distinguish between internal poverty, ie, despair, and external poverty -- lack of money.

The definitions always get you on these things. For instance, most people are familiar with studies that show "the rich get richer while the poor get poorer" in some western societies like the United States. What readers fail to gleam from these studies is that while the numbers for the quintiles do show those movements, people move around between quintiles a lot more than is acknowledged. So when we say the poor get poorer, we are confusing the statistical average of a category of random people with actual, real people. Actual, real people move about in income levels quite a bit. The statistical bottom fifth of people in general, however, is not doing so well.

Likewise when we talk about poverty, or the economy, or social policy, we're dealing in large, averaged groups of things, not individual people. It makes a difference because we are individual, unique people, not statistical clumps.

I'm not saying that the internal attitudes of a person is enough to overcome any external obstacle. What I am saying is that the way we internalize external challenges is a better measure of anti-poverty and future happiness than the amount of money we have in the bank. Therefore, you cannot "kill" me, make me poor, by taking away my money. My internal wealth is outside of your ability to change.

I'm really just replying to the idea that 'murder' doesn't count, or that outside influences cant cause poverty. I'm not interested in internal vs external poverty. To me poverty is an extreme lack of resources such that it impacts on the basics of life. So while you might not rate external poverty as very important, that's all I'm talking about here.

I create wealth by increasing efficiency and destroying jobs. I have made many people redundant and gotten them laid off. It's the name of the game hop from one useful skill to the next or become obsolete.

I don't really care about these lost jobs but saying it's their fault that they become redundant is missing the point. Luck is a large factor in both the generation and retention of wealth. The risk of true poverty limits society’s just as excessive crime by reducing people’s willingness to take risks. Young people are more likely to do a startup because they have lower risk of failure. Losing everything at 25 is vary different than losing everything at 55.

Note: I am not saying we need to do anything with the 3rd world but I feel limited job training and basic welfare help many people bounce back. Spending a small percentage of GDP on such things is an investment that may or may not pay off but saying it's useless as an ideological stance is missing the point. However, the numbers I have seen on wikipedia (http://en.wikipedia.org/wiki/Welfare_state) suggest that we spend 14% of GDP on welfare which seems insane. Are they looking at SS as welfare?

Yeah, skimming the Wikipedia article, it seems that they are classifying social-insurance programs like Social Security as "welfare", whereas most people would define "welfare" as programs that are specifically targeted to poor people.

And one of the reasons Social Security is so politically secure--even at the height of the Dubya Administration's influence, a proposal to privatize it went down in flames--is that middle-class as well as poor voters expect to benefit from it.

No one benefits from social security.The average payout is below the input.

Members pay so that more senior members may benefit and then hope that newer member will pay enough so that they may benefit as well. It functions like a large, mandatory pyramid scheme and only survives because people who have paid fortunes into it expect to be compensated.

The benefit you get from Social Security is that if you retire before you die, if a spouse or parent who provides your family income retires or dies before you die, or if you become too disabled to work, you don't have to worry about outliving your savings, and you don't have to worry about inflation making your annuity worthless.

Both of the problems could easily be solved by replacing SS with an ordinary savings account. Not to mention that Fed loans to SS aggravates inflation greatly.

An "ordinary savings account" can't give you a stream of income for the rest of your life that adjusts for inflation, even if you have to retire early due to disability, regardless of the state of the stock market or interest rates.

And right now, Social Security loans money to the rest of the government, not vice versa.

If a man from a wealthy family background spends six years in college with a trivial income (from a part-time job at the college bookstore, or whatever) and then lands a well-paid professional job, he has jumped from a low quintile to a high quintile, but is not the sort of "income mobility" that most people hope their children will have access to.

Your example isn't the same thing. Murder would be equal to thievery in your example since murder is an action.

This is technically true, but I believe that it misses the point.

Death is the rest state. Which is why much more energy is spent in keeping people alive, rather than merely preventing death. That is, if you want to extend your life, you need to not look so much at the causes of death, as at the prerequisites for life. Getting food is more important than preventing murder.

The same is true with poverty. You can try to prevent war and corruption, but you won't eliminate poverty just by eliminating the impoverishing factors. You need to actually create wealth.

"If you want to experience poverty, just do nothing and it will come."

I know lots of people - the working poor - who are doing a hell of a lot more than nothing, and poverty still comes.

Nod. If I start life tied to a load of bricks, and you start in a Ferrari, I can do a helluva lot more than you and still get nowhere. The history of slavery should be ample proof of that.

It's one thing to say that "We should ask what are the causes of wealth and try to recreate and reproduce them." It's another thing entirely to deny that there are no structural, sociological barriers to escaping poverty.

You'd be astonished at how many who start out with the Ferrari wreck it in short order and how many who start out with bricks become very strong because of it.

People who start out with wealth seldom create wealth. In the best cases, they usually just administer it. Its the people who start out with the bricks that seem to end up creating the wealth.

Slavery and poverty are different economic relationships altogether. Equating them is usually rhetorical hyperbole and if taken seriously, leads to some very wrong conclusions.

>>You'd be astonished at how many who start out with the Ferrari wreck it in short order and how many who start out with bricks become very strong because of it.<<

Outlying cases are irrelevant. Of course people overcome the odds in both directions. But given equal driving ability, the Ferrari will always win the race, take the prize money, and buy their children a Ferrari.

>>People who start out with wealth seldom create wealth.<<

What is the basis of that statement? Bill Gates was born to a very wealthy family. Warren Buffet was born to a stockbroker-turned-Congressman, so definitely at least upper middle class. Carlos Slim Helu has been quoted saying "I came from a wealthy family. I have always had money."

Seems the top three wealth-generators in the world were born wealthy. They attended Harvard, Columbia, and the university consistently ranked the best in Latin America, respectively.

The only thing I'm astonished at is that there are people who have so little understanding of how the world works that they think poverty and wealth are not both self-perpetuating.

Only the real world is not a race and there is no prize money. If you own a big factory, you get richer not because God gives you a prize for having a bigger factory than everyone else, but because your factory creates wealth, out of nothing.

Wealth does tend to perpetuate itself, as in the above example, but this is hardly lamentable. And "poverty perpetuates itself" is basically a bombastic way of saying "lack of wealth doesn't, in and of itself, create more wealth", which is natural and could never be otherwise.

Of course, that's if we ignore the psychological component of it. But what can you do about that? Go into people's homes and tell them to stop being such feckless idiots?

">>People who start out with wealth seldom create wealth.<<

What is the basis of that statement? Bill Gates was born to a very wealthy family."

I'm pretty sure Bill Gates made more cash than he created wealth. Those are orthogonal concepts. It's possible to make cash without creating wealth or indeed, destroying it (ex: "successful" spammer that destroys the value of email). It's also possible to create lots of wealth without making money (the example is left as an exercise for the reader).

About the only way to make money without creating wealth is to steal it from somebody else. Typically when somebody pays you for something you did, it's because they'd rather have your service or product than the cash they paid for it. Typically this means you created something valuable (or that the dollar is depreciating so quickly everyone's eager to get rid of it, but more on this later).

The spammer created value to the companies advertising and more importantly created a whole market for spam filtering solutions (the same way virus writers created a huge anti-virus market, to the extent that some wonder if a lot of viruses are not actually written the AV vendors themselves).

This is the broken window fallacy. Making a "market" in window repairs by smashing windows doesn't create wealth.

"About the only way to make money without creating wealth is to steal it from somebody else."

Well. Let's say you have a company M that creates X wealth and has a monopoly. And then you have companies A, B, C, D, E and F that create 7x wealth but are driven out of the market by M's monopolistic practices. M indeed creates wealth, but the market is actually getting less than it would without it. It might not be called stealing, but I feel robbed.

Similarly, I'm pretty sure the value the spammer is creating for the companies they advertise for is largely offset by the value it's destroying for the masses of people they advertise to. Besides, the kind of "products" sold by "companies" via spammers is not exactly friendly neighborhood or good quality (if there's even an actual product at all).

edit: "Typically when somebody pays you for something you did, it's because they'd rather have your service or product than the cash they paid for it."

Sure, but maybe there's another service/product that could give you much more for the same money but you don't know about it because of propaganda (marketing, FUD) or simply because the company has been driven out of the market unfairly, as I said earlier.

Don't confuse a net loss of wealth with wealth not being created. If everybody got an equal portion of total wealth, then monopolies and spammers would be bad, but since somebody wins (even though there are more losers), wealth is technically created.

A better scenario is the "creative destruction" when one industry is displaced but society overall benefits, i.e. cars over horses, Wikipedia over Encarta over Britannica, etc.

"Don't confuse a net loss of wealth with wealth not being created. If everybody got an equal portion of total wealth, then monopolies and spammers would be bad, but since somebody wins (even though there are more losers), wealth is technically created."

I must have read wrong. You're saying spammers are not quite bad?...

"A better scenario is the "creative destruction" when one industry is displaced but society overall benefits, i.e. cars over horses, Wikipedia over Encarta over Britannica, etc."

The new industry replaces the old one because it creates more value than the old one, no? I think car factories create more value than stables...

Also, in the monopoly case it's a company that hampers global progress to protect its own interests. I like to seek win-win scenarios so that doesn't resonate well with me.

I meant bad in the economic sense, where no one is better off. The spammer is certainly better off for his work even if everyone else is worse off.

> It's also possible to create lots of wealth without making money

Habitat for Humanity comes to mind.

I don't see how you could come to that conclusion. His products are in damn near every home and office in the first world. They helped bring PCs to the masses and make computing affordable.

Love 'em or hate 'em, his company is one of the most significant of modern times. He generated lots of wealth.

>>You'd be astonished at how many who start out with the Ferrari wreck it in short order and how many who start out with bricks become very strong because of it.

I had a general idea of how many belong to the former and latter categories, so I'm not astonished. The statistical data supports my point.

http://www.economicmobility.org/

>>People who start out with wealth seldom create wealth. In the best cases, they usually just administer it. Its the people who start out with the bricks that seem to end up creating the wealth.

This isn't just about starting off with wealth. My Ferrari metaphor is more about having the repertoire of values and skills needed to become wealthy in a place like the U.S. rather than simply being endowed with money. You're vastly more likely to do well in life if you have parents who spend time with you teaching you to read, making sure you do your homework, provide emotional support, and instill values of hard work and success than you are if you have parents, a parent, or no parents who do none of those things.

The late John Ogbu studied why the children of affluent African American parents who went to excellent schools were much more likely to underperform academically relative to their peers, and discovered that parental disengagement was a major factor.

http://www.hepg.org/her/abstract/38

Sometimes people manage to acquire the necessary values and thus the skills necessary to do well, despite starting off in adverse conditions. But they're the exceptions, and were psychologically and sociologically positioned to be that way. So unfortunately they can't be used as examples demonstrating that "anybody" can overcome adversity.

>>Slavery and poverty are different economic relationships altogether. Equating them is usually rhetorical hyperbole and if taken seriously, leads to some very wrong conclusions.

It's not exactly a stretch to say that the enslaved have typically been poor on account of their being slaves, is it? And I never equated slavery and poverty[1]: I used slavery as an obvious example of how you can have the deck overwhelmingly stacked against you.

1. I'm resisting the urge to say, "Anyone who says or implies that I equated them is themselves engaging in rhetorical hyperbole." :)

Sorry, I guess I took the slavery example to mean that this was a means to have the deck stacked financially against you in the context of rich vs. poor. Yes, being born a slave has historically been an insurmountable barrier to wealth.

It's not exactly a stretch to say that the enslaved have typically been poor on account of their being slaves, is it?

What I really wanted to drive home is that slaves are neither poor nor rich. These concepts are based on the ownership of property. Slaves are property and are forbidden to own property. Within the framework of the law, it is possible to escape poverty, not so with slavery. When politicians say that the poor are "slaves" to the rich or that poverty is a new kind of slavery, its a clean miss and usually indicates a rather ugly agenda hiding beneath.

I know lots of people

Just wondering--do you really know "lots of people" who are among the "working poor"?

I come from Appalachia and have known--genuinely, no bullshit here--lots of "working poor" and can't honestly say that there was some systematic conspiracy to hold them down, rough them up, prevent them from rising, etc.

Fact is: There are a lot of people living in the lap of luxury--luxury measured by creature comforts--who in any other age would be lucky, yes lucky, to spend 12 hours a day behind a horse's ass.

The real reason for people staying in the lower ranks is exactly what we already know: They have some dysfunction. Perhaps a lack of intelligence, or an excess of impulse, or simply a chronic inability to show up to work on time. The latter might suprise you, as it hardly matters if programmers get up at 8 or 9 or 10, but in low-end jobs, one of the big problems among "trouble employees" is simply their unwillingness to follow a schedule. Who's to blame?

There are lots of examples of poor people who are hard working and still poor, and lots of examples of wealthy people who fell into it. There is no moral value to wealth and to say so not only insults our intelligence but attempts to justify terrible injustices.

At the same time, many people (we'll call them "left-wing") claim that there is no agency behind wealth or poverty, and that therefore we should punish the "lucky" rich people to help the "unlucky" poor. This attitude is utterly simplistic and destructive in a society when taken to the extreme (the left-wing tends to be extreme).

"punish the rich"... "the left-wing tends to be extreme"; this is just blatant partisanship. There is nothing to support, just opinion... what productive conversation could start this way?

This is why politics here is dangerous.

As a left-winger, here goes:

Yes, there are nut jobs. But, yes, you are engaged in a fallacious generalization. It's also called a prejudice. But here's a softer restatement of what you said for those of us who at least think we're not nut jobs:

"At the same time, many people (we'll call them "fellow humans") claim that there is sometimes wealth and poverty without agency and that those with means should help those without means, particularly in cases without agency or in cases with resistant intertia, because of the direct or indirect causal relationship between the source of the means and the reduced or diminished means of those living in or near poverty. This attitude is either selfish or altruistic on an individual level depending on the means of the proponent of this attitude and destructive in a society when taken to the extreme (some fellow humans tend to be extreme when you largely ignore fellow humans who do not fit your definition of extreme)."

How was that? I don't assume that all "right-wingers" like you might be are extreme. I'm related to many of them, friends with many of them. They have good ideas and a different opinion on fairness and entitlement. It's possible that everyone's partially right and it's a good idea to mingle more often.

You can start off in the world in circumstances that make you much less likely to succeed later, circumstances that are totally outside your control. If you acquire an early aversion to people or a mental illness due to childhood rape, I'd have to be pretty dense to say your lack of productivity is your fault. If you didn't get into as good a college as the kid who's parents could afford after school SAT prep classes, I couldn't really say you're a worse student. If your parents sucked at child rearing and raised you on a healthy diet of Cheetoes and Disney videos instead of broccoli and Legos, you can't be totally to blame for your poor brain development and lack of impulse control. Writing someone off as having a dysfunction without considering the cause is stupid.

Of course people's parents can do all sorts of things to create a poor environment for a child to grow up in. Maybe their parents did the same thing. But at some point, regardless of what your parents did, you have to take responsibility for your own actions and try to make something of your life -- or not.

By the same token, dysfunctional rich kids into drugs and other methods of squandering wealth are so common that they're a cliche. Maybe their emotionally distant parents are to blame too.

Regardless of how they got there, at some point you have to just acknowledge that some people have useful survival skills for getting ahead in society, and some do not. Also, that virtually anyone who isn't actually mentally retarded has some ability to develop those skills if they want to strongly enough.

This leaves you the option of modeling these skills as obtainable, which means that you create incentives for people to get their sh*t together, and the option of modeling these skills as innate and beyond anyone's control, which means that you just support people who drew the short straw and don't bother with incentives.

I think it's pretty clear which of these models contributes to wealth gain over time and which contributes to welfare dependency.

I'm surprised that in a group as logical as YCNews, no one called him on this. Just because doing nothing leads to poverty doesn't mean it's the only way to get to poverty, or that doing something will get you out of it. It's just one path that doesn't imply anything about the other paths. All the talk of bricks and Ferrari's are arguments about a point that wasn't made.

This is insightful. One should point out however, the inverse does not hold true. Poverty is not a universal sign of laziness or inaction. You can become poor in spite of working very hard. It is important to keep this in mind lest we become completely unsympathetic to those less fortunate, who, in some cases work very hard and yet have nothing.

Also, as an aside I'd like ot point out that material wealth is something that isn't universally pursued. Some people a happy investing in other things instead once their very basic needs are met.

In some situations and places, wealth can be harder to create. On the individual level, it would be hard to refute the fact that somebody with an Ivy League college education has more wealth creation opportunities than a farmer from a 3rd world country. Same thing also applies to poor countries and rich countries. So even though poverty is the rest state, it really doesn't help that some people are taking advantage of other people to create it.

This just shows that there are forms of societal wealth, without which there is just another form of poverty. Things like a legal system, low crime, enforceable contracts, public safety, etc are all forms of wealth that enable new investments and more wealth. Falls in the same category as seaports, natural resources, an educated populace, etc.

When analyzing systems, we typically look for a transient response and the initial conditions. Extending this analogy, it would seem natural that even if we knew the characteristics of a system, the behavior of the system would be largely controlled by the inputs.

I'm not sure either element can be excluded when trying to solve this - my guess is that it's the need to fit things into our own frameworks and understanding that pushes people to grossly oversimplify.

Maybe a bit more enlightening (if you read further than the opening quote) http://www.techcentralstation.com/article.aspx?id=120302A

In other words, Poor people are just lazy.

Sorry, but it's been my experience that people who submit that argument have know neither people nor poverty well enough to speak as an authority to its causes.

In other words, capitalism is a treadmill!

This is a woefully ignorant article that fails to include any piece of evidence to back up these claims.

Take, for instance, many countries in Africa. What prevents these countries from not rising in the poverty ladder is not the lazy, dumb people of these countries.

First, they can't sell products to other countries because the majority of countries are land-locked, meaning they have no way to ship their goods out at a reasonable price. They don't have any ports in their country and the neighboring countries with ports are hostile or unsafe.

Second, wealth is not a stable commodity in these countries due to coups and constant political restructuring and military action. Even if you were a very hard ambitious worker, there is nothing you can do about external forces (read: rebels invading your home/shop and stealing all the wealth you have built up).

Third, little of Africa is actually arable, and Africa can't even become an agrarian society because there isn't really the resources for them to do so. And the resources that are valuable to the rest of the world that could generate money for African countries - like, oil and diamonds, become hotly contested and a source of conflict and instability, furthering reducing the value of storing wealth.

Take some time to learn about the world if you have a strong opinion on this matter.

You're totally agreeing with the article's premise that poverty is a lack of wealth. Seaports, navigable rivers, stable, friendly neighbors, political stability, and arable land are all forms of wealth. Just because they aren't owned by an individual doesn't mean they aren't wealth. Most people in Africa lack these things and therefore they are poor. If these things existed, then there would be an infrastructure that would let individual, hard working and industrious Africans become wealthier.

If you compare any rich country with any poor country, you can make a similar list of things the poor country is lacking that make it poor. Those things are all forms of wealth. Whether it is natural or man-made doesn't matter.

My mistake - I read the first two lines and that set the tone for the rest of the article. Those first two lines, though, have no relevance to the rest of the article. You can in no way argue that the lack of wealth (the definition of poverty stated in the article) is caused by a 'rest state of doing nothing' (also a definition of poverty in the article), which is what the first two lines imply.

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