Please note that this study is in the context of extreme poverty in populations such as rural villages in Bangladesh.<p>It’s an interesting study and worth reading if you’re interested in what it takes to lift these populations out of poverty. The authors propose that their extreme poverty is a meta-stable state that prevents them from accessing wealth-building opportunities. The authors show that time-limited wealth transfers of sufficiently large size can help these people escape the meta-stable poverty state and transition into a wealth-accumulating state.<p>However, the comments here rushing to project the conclusions on to the relatively wealthy (on a global scale) citizens of countries like the US and Europe are abusing the study’s conclusions. Similar wealth traps may exist in these countries, but the relative thresholds would be akin to a homeless person living on the streets trying to secure a job. Attempts to project these study results on to things like hiring practices at big tech companies, where anyone able to apply at all is already orders of magnitude more wealthy and privileged than the subjects of this study, are missing the point entirely.
Here's interesting observation by by Nobel prize-winners Abhijit Banerjee, Esther Duflo:<p>"We have already seen, in the previous chapter, another example of people who had lucrative opportunities to save but did not use them: the fruit vendors from Chennai, who borrowed about 1,000 rupees ($45.75 USD PPP) each morning at the rate of 4.69 percent per day. Suppose that the vendors decided to drink two fewer cups of tea for three days. This would save them 5 rupees a day, which could be used to cut down on the amount they would have to borrow. After the first day with less tea, they would have to borrow 5 rupees less. This means that at the end of the second day, they would have to repay 5.23 rupees less (the 5 rupees they did not borrow, plus 23 paisas in interest), which, when added to the 5 rupees they saved that second day by again drinking less tea, would allow them to borrow 10.23 rupees less. By the same logic, by the fourth day, they would have 15.71 rupees that they could use for buying fruit instead of borrowing. Now, say they go back to drinking their two cups more tea but continue to plough the 15.71 rupees they had saved from three days of not drinking so much tea back into the business (that is, borrowing that much less). That accumulated amount continues to grow (just as the 10 rupees had turned into 10.71 after two days) and after exactly ninety days, they would be completely debt-free. They would save 40 rupees a day, which is the equivalent of about half a day’s wages. All just for the price of six cups of tea! The point is that these vendors are sitting under what appears to be as close to a money tree as we are likely to find anywhere. Why don’t they shake it a bit more?"<p>From "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty"<p><a href="https://www.amazon.com.au/Poor-Economics-Radical-Rethinking-Poverty/dp/1610390938" rel="nofollow">https://www.amazon.com.au/Poor-Economics-Radical-Rethinking-...</a>
These conclusions seem to spit in the face of "meritocracy". It's always puzzled me that this idea of meritocracy, especially in tech (notably USA), is so pervasive, bleeding into our corporate performance reviews and our pro-diversity efforts ("we hire only according to merit" <signed, Diversity Manager>). But it is so internally irrational. I'm reminded of this argument:<p>> The case against meritocracy can be put psychologically: (a) The abolition of materialist-elitist values is a prerequisite for the abolition of inequality and privilege; (b) the persistence of materialist-elitist values is a prerequisite for class stratification based on wealth and status; (c) therefore, a class-stratified meritocracy is impossible.<p>> The case against meritocracy can also be put sociologically: (a) Allocating rewards irrespective of merit is a prerequisite for meritocracy, otherwise environments cannot be equalized; (b) allocating rewards according to merit is a prerequisite for meritocracy, otherwise people cannot be stratified by wealth and status; (c) therefore, a class-stratified meritocracy is impossible.<p>Source: <a href="https://statmodeling.stat.columbia.edu/2007/12/04/meritocracy_won/" rel="nofollow">https://statmodeling.stat.columbia.edu/2007/12/04/meritocrac...</a><p>The idea that "innate" merit should be rewarded (this underlies what we consider meritocracy) is fundamentally a noncontinuable state. Above all we need to focus on delivering opportunity via improved circumstances and empowerment, irrespective of merit or success: that is the only path to actual equality.
> We find that in the absence of credit constraints only 2% of households would be best off doing wage labor, while 97% of households are exclusively reliant such work at baseline. Conversely, only 1% work in livestock when 90% would do so if they had access to the same asset wealth as the middle and upper classes. Overall, this implies that 96% of households are forced to misallocate their labor.<p>So the authors suggest that currently 1% of the labor pool is working in livestock, but an optimal allocation would be 90% of the labor pool? Ridiculous.
In the US: "graduate from high school; get a full-time job; don’t have a child before age 21 and get married before childbearing", this gives you %75 chance of being middle class, about %89 chance of not being poor. This isn't good enough, but seems possible!<p><a href="https://www.vox.com/2015/7/24/9027195/haskins-sawhill-norms-marriage" rel="nofollow">https://www.vox.com/2015/7/24/9027195/haskins-sawhill-norms-...</a>
> A first indication of this is seen in Figure 1a which shows a kernel density estimate of the distribution of productive assets pooling all wealth classes. The distribution is bimodal, with a mass of households around 0.25 and 6.5, and hardly anyone in between.<p>This is an important result in understanding how to get people out of poverty in undeveloped countries, but I suspect it won't translate well to industrialized countries like many in the comments are suggesting. The key result seems to be dependent on the bimodal wealth distribution. (Giving a cow to someone in the lower bucket was enough to push her into the next bucket.) Income distributions from industrialized countries look like the cleanest log normal distributions you've ever seen, so there just isn't evidence of a great repulser in higher income countries that you could push poor people over like they do in this study.<p>Caveat: They imply that income and consumption are bimodal, but never plot them, only wealth. Wealth is notoriously hard to measure, and I can only find good histograms of income for the USA. Income and wealth <i>should</i> track each other, at least over a log scale, but I am not comparing <i>exactly</i> the same thing.
For those who want a TL;DR, below is an extract of the summary. I think they did a good job, the article was well written.<p>Poverty traps are one of the most fundamental concepts in development economics. The contri- bution of this paper has been to provide evidence for their existence using the combination of a randomized asset transfer and an 11 year follow up in rural Bangladesh. Our key finding is that people stay poor because they lack opportunity. It is not their intrinsic characteristics that trap people in poverty but rather their circumstances. This has three implications for how we think about development policy.<p>The first is that big pushes that enable occupational change will be needed to address the global mass poverty problem. Small pushes will work to elevate consumption but will not get people out of the poverty trap. The magnitude of the transfer needed to achieve occupational change may be much larger than is typical with current interventions though importantly it can be time limited. Therefore the fiscal cost of permanently getting people out of poverty through a large, time limited transfer might actually be lower than relying on continual transfers that raise consumption but have no effect on the occupations of the poor.<p>The second is that big push policies can have long-lasting effects. Our analysis of long-run dynamics indicates that the asset, occupation and consumption trajectories of above threshold beneficiaries diverge from those of below threshold beneficiaries over time. This finding is impor- tant as it indicates that, by engendering occupational change, one time pushes can have permanent effects.<p>The third is that poverty traps create mismatches between talent and jobs. We have shown that misallocation of labor is rife amongst the poor in rural Bangladesh. Indeed, we show that the vast majority of the poor in rural Bangladesh are not engaged in the occupations where they would be most productive. They are perfectly capable of taking on the occupations of the richer women but are constrained from doing so by a lack of resources. The value of eliminating misallocation is an order of magnitude larger than the cost of moving all the beneficiaries past the threshold. This is important as it implies that poverty traps are preventing people from making full use of their abilities and indeed it is the mass squandering of people’s abilities that is the key tragedy of mass poverty.
Adult education is shit for poor people and many people had enough of education when getting out of school/university.<p>We need to show people that life long learning can be fun and we have to make it affordable.<p>Even in Germany, were studying is essentially free, poor people have to stay in bad jobs because they couldn't afford to pay their rent when getting a degree.
For those that believe people are poor because they did not work hard, I am curious what importance you attribute parenting to the outcomes of children?<p>Every parent I know invests a significant amount of time and often money in raising their children, and there is a significant amount of empirical evidence that parents play a significant role in how children develop. Do you simply believe the evidence to the contrary? It does exist, I am aware. It often seems to measure obviously superficial interventions, in my opinion, but I understand the debate.<p>What is the level of parenting beyond which there is no additional return in terms of economic outcome?<p>Because from what I understand, parents play a significant role in not only cognitive development (reading at an early age, for example) but also in terms of setting expectations for their children.
These conclusions apply to the third world, not the rest of us. Here in Europe for example, anyone can study and become an entrepreneur (I did it, with pretty much 0 wealth in the family).
I've been poor all my life, the thought of having money laying around scares me, I should invest, but giving it away like that scares me even more.
I'm moving next week and part of my reserves will be gone, and weirdly enough I'm relieved that someone else will take care of it. I don't feel fit to handle it.