More on Wealth, Poverty, and Politics

image from Amazon

Economist Thomas Sowell has a new edition of his classic book Wealth, Poverty, and Politics, and talked about it in the latest Uncommon Knowledge interview.

Peter Robinson starts the interview with a quote from the book, which serves as a theme:

It is not the origins of poverty which need to be explained. What requires explaining are the things that created and sustained higher standards of living.

In explaining what he means by that, Dr. Sowell says,

There are actually books with titles and subtitles about the origins of poverty. Well, the entire human species began in poverty. So I don’t know why we say, what is the origin? Perhaps the Garden of Eden or someplace. But more than that, you’re trying to explain why some countries are poor rather than trying to explain why other countries are more prosperous. There’s no explanation needed for poverty. The species began in poverty. So what you really need to know are what are those things that enable some countries, and some groups within countries, to become prosperous.

He further explains that there are unstated assumptions about income inequality that are false, but are left unexamined. To use another quote from the book,

One of the key implicit assumptions of our time is that many economic and social outcomes would tend to be either even or random, if left to the natural course of events, so that the strikingly uneven and non-random outcomes so often observed in the real world imply some adverse human intervention.

So, there’s this idea being promulgated that, because people are equal, their outcomes should be equal. But people aren’t equal. They are equal before the law—no class of humans more deserving of justice than any other—but people are different in intellect, drive, learning, creativity, desires, preferences, and circumstances.

Dr. Thomas Sowell
image from Uncommon Knowledge

And people are located in different places. Dr. Sowell talked about the Zaire River in Africa, which carries more water than the Mississippi. But it is full of falls and cascades that make it mostly non-navigable, while the Mississippi smoothly changes elevation by only about four inches per mile. People living by the Mississippi, then, have a water route that people living by the Zaire River do not.

He also talked about isolation, such as caused by mountains. People living in isolated Afghan mountain villages live at approximately the same level of poverty as people in isolated Appalachian mountain villages. And people who live discovered on isolated islands are found living very little different from stone age people. Isolation means less trade, less learning from others, less benefiting from others.

So it isn’t some rich person taking away from a poor person; it is a rich person doing what it takes to escape from poverty.

We basically know what those things are. One of the main sources of wealth is human capital. Here’s another quote from the book:

The welfare state reduces the incentives to develop human capital. And receiving the products of other people’s human capital is by no means as fundamental as developing one’s own human capital.” [18:30]

Following the quote, Peter Robinson asks “What is human capital, and why does the welfare state suppress the incentives to develop it?” Dr. Sowell answers, “Well, human capital is the ability to create the material things that constitute wealth.”

A classic example. In the 1970s, Uganda decided that the Gujaratis of India were just too wealthy and controlled too much of the economy. They sent them out, and they wouldn’t let them take their wealth with them. So the Gujaratis arrived mostly in England, destitute. And the Ugandan government has taken over all this material stuff. Over a period of a relatively few years, the Gujaratis were prosperous in England, and the Ugandan economy collapsed, because they didn’t have people who could do what the Gujaratis were doing. And so they no longer had the same production.

It's also one of the problems with trying to solve things by confiscating the wealth of the wealthy. All you can confiscate is the material wealth. You cannot confiscate the human capital.

Confiscating wealth from those who created it and giving it to those who didn’t create it only moves things around, not wealth-generating capabilities.

And income redistribution is wrong-headed in other ways. Talking about the concern that the top 10% have undue influence over society, Dr. Sowell says,

TS: 53% of American households are going to be in the top 10% at some point or other in their lives. You talk about these percentages as if these are ongoing, the same set of people in this bracket, and that bracket. Most Americans do not stay in the same 20% bracket for more than one decade.

PR: So it’s largely a life cycle: you’re poor when you’re young, and doing well when you’re old.

TS: Yes. And there’s nothing mysterious about that. Probably most people in this country, when they started out at entry level jobs were not making what they’re making when they’re forty years old. Heaven knows, I was making $2 a day to deliver groceries, and depended on tips for the rest. [17:20]

He later added,

Somebody said the other day that they want to ease the pain of people in poverty. The pain of poverty is what got many people out of poverty. [35:23]

Peter Robinson ended the interview by having Dr. Sowell read a passage from the book, which summarizes the fallacy of economic equality as a goal:

It is by no means obvious why we should prefer trying to equalize income to putting our efforts into increasing output. People in general, and the poor in particular, seem to vote with their feet, by moving to where there is greater prosperity, rather than where there is greater economic equality.

Rising standards of living, especially for those at the bottom economically, have resulted not so much from changing the relative sizes of different slices of the economic pie as from increasing the size of the pie itself, which has largely been accomplished without requiring heady rhetoric, fierce emotions, or bloodshed.

Does it not matter if the hungry are fed, if slums are replaced by decent and air conditioned housing? If infant mortality rates are reduced to a tenth of what they were before? Are invidious gaps and disparities all that matter? In a world where we are all beneficiaries of enormous windfall gains that our forebears never had, are we to tear the society that created all this apart because some people’s windfall gains are greater or less than some other people’s windfall gains? [40:34]

Thomas Sowell always offers up truth with good humor and common sense. So even when he says what he has said before, we enjoy it. Let’s summarize with a couple of basic economic principles:

·         Thou shalt not covet. [I wrote about this April 26, 2013]

·         Live the principles that build social capital. [I wrote about this February 24, 2012]

Habits and Thoughts of Prosperity

There’s a formula for escaping poverty in America, and entering the middle class, which we’ve repeated here a number of times: here, here, here, here, here, here, and here. 

•        Don’t have sex before age 20.
•        Don’t have sex until after marriage.
•        Stay married.
•        Obtain at least a high school diploma.

The economic problem is solved with social/civilization solutions.

A couple of contrasting articles came to my attention recently. The first, “Telling Poor, Smart Kids That All It Takes Is Hard Work to Be as Successful as Their Wealthy Peers Is a Blatant Lie,” explains why the poor are so disadvantaged that no amount of hard work can overcome their disadvantage. The other, “Will Your Child be Rich or Poor? 15 Poverty Habits Parents Teach Their Children,”  explains the difference in ways of thinking between the poor and the wealthy.

The formula above is pretty minimal. Out of poverty means you’ve got housing, clothing, and food handled. But it might require a lot of hard work, lifelong struggle, and lack of the perks of wealth: travel; additional education; art and music for pleasure; luxuries and comforts; enjoying better foods, clothing, and housing.

Is that fair? People who think it is wrong for some people to enjoy things that all can’t enjoy are different from people who enjoy those things without guilt. And our beliefs determine a lot about our lives. So maybe those thoughts are worth looking at.

The you-can’t-get-out-of-poverty beliefs revealed in the first article are something like, “No one gets wealth just from hard work, good ideas, and social connections; they get that on the backs of the disadvantaged,” and “The deck is stacked against the poor, so no matter how hard they work, they’ll never get ahead.” The beliefs are self-fulfilling.

Changing thoughts can change the outcome.

There’s something to be said for social capital; it can make up for lack in a limited number of households. But if the larger community doesn’t have enough social capital, the disadvantages of social-capital-lacking families can be devastating.

The disadvantages can’t be overcome with money. Certainly they can’t be wiped out by taking money from the wealthy and giving it to the disadvantaged. Money is useful as economic capital, but it isn’t moral—it’s neutral.

The second article shows there's a difference in habits and ways of thinking that overcome the disadvantages, using a couple of lists. The first list contrasts habits of the wealthy and the poor. And the second describes what parents can do to teach the right ways of thinking that allow for wealth.

Here are a few of the contrasts (some of these I’ve paraphrased):

•         80% of the wealthy are focused on at least one goal vs. 12% of the poor.
•          83% of the wealthy attend/attended back-to-school night for their kids vs. 13% of the poor.
•          67% of the wealthy watch 1 hour or less of T.V. per day vs 23% of the poor.
•          9% of the wealthy watch reality T.V. shows vs. 78% of the poor.
•          73% of the wealthy were taught the 80/20 rule vs. 5% of the poor (live off 80% save 20%).
•          8% of the wealthy believe wealth comes from random good luck vs. 79% of the poor.
•          79% of the wealthy believe they are responsible for their financial condition vs. 18% of the poor.

The wealthy have different habits, and think different thoughts. They live their lives differently.

So what is on the list of what to teach? All of it assumes teaching them the minimal formula of escaping poverty, listed above; that goes without saying. Then, some of it is clearly economic, but much of it is social (again, somewhat paraphrased).

•          Limit TV, social media, and cell phone.
•          Require educational reading, in addition to recreational reading.
•          Get kids to physically exercise every day.
•          Limit junk food.
•          Teach goal setting—short-term and long-term.
•          Expect children to work to earn money, and to volunteer.
•          Teach children to save a large portion of their earnings and gifts of money.
•          Teach manners, and gratitude.
•          Encourage children to risk making mistakes, which can be used for learning.
•          Teach children to manage their anger and negative emotions appropriately.
•          Encourage sports and additional extracurricular interests.
•          Spend time talking together as a family every day.
•          Teach principles of good time management.

The poor need to learn that poverty can be a temporary place, and that within themselves lie great possibilities. Nothing keeps them in poverty more than thinking they’re stuck there, and then making decisions as though nothing they do matters.

Changing thinking would work better than taking all the money from all the top 1% of earners, and redistributing it to the poor. Those wealthy who are newly made poor are likely to recover, probably within their own lifetime, and certainly within an additional generation. Those given sudden wealth would remain in poverty, or return to it within a generation.

Prosperity requires certain economic practices, but it also requires living the principles of civilization. We don’t need ways to take wealth from those who have made it; we need ways to teach those who don’t have it what it takes to earn it. Teach them the habits and beliefs of prosperity.

Family Superpower

I spend a lot of time with youth and young adult literature. Many of these feature young people with special powers, or at least special skills: magic (Harry Potter), electrical powers (Michael Vey), psychic control of objects (Freakling), wind (The Goose Girl), archery and strategy (Ranger’s Apprentice and Hunger Games). A young person goes about life thinking he/she is normal, or even less than normal, and then gets thrust into extraordinary circumstances that require using the newly discovered special skills.

There’s something fairly positive in the message that everyone has value, and everyone is important and special in some way. You just need to find your talent/purpose/superpower to benefit mankind.

I have been considering the idea that, in the ordinary real world we live in, some of us have significant advantages, just because of a connection to what has for millennia been ordinary: growing up in an intact, loving family.

The social data continues to grow, all of it showing advantages to children raised in intact families with married mother and father. I’ve written about the value of family, mothers, fathers, and marriage many times (a good starting list is in the April 23, 2012 post “More on Marriage”). I’ve written a few times (see “Family Ties to Economics” December7, 2012) about the well-established formula for preventing poverty:

1.         Don’t have sex before age 20.

2.         Don’t have sex until after marriage.

3.         Stay married.

4.         Obtain at least a high school diploma.

But what if there is an additional formula, not just for avoiding poverty, but for likely greater success? Last year I wrote  about Charles Murray’s book Coming Apart, which described four founding principles: industriousness, honesty, marriage, and religion. These were agreed upon as essential virtues by all the founders. They are agreed on as virtues today generally in the most successful areas (Murray referred to them as the SuperZips, identifying certain zip codes). The upper middle class adheres to these principles, and is thereby perpetuating success generation after generation, while lower middle class and lower class areas (by income and education) lack religious commitment, intact families, honesty, and all the behaviors that prevent decay.

As I write about at the Spherical Model, the answer to greater success is what it has always been for thriving civilization: strictly live the civilizing principles (essentially the Ten Commandments) and value family. Family is the way the civilizing principles pass from generation to generation. Schools can’t do it, especially without the support of the home. Government can’t do it. Without family, even the churches can’t do it.

I have a story, from almost two decades ago, that shows the passing on of the values. It was when our second son was in I believe fifth grade (still in public school at that point), and they were going through the first iteration of basic sex education. I had been to the school and reviewed the curriculum and talked with the school nurse ahead of time. While I would have preferred handling this entirely at home, this was before I became a homeschooler, and I felt satisfied with the way the school was teaching the information (family values included in that rather civilized corner of the country). Economic Sphere, as he frequently did, was excited about new information, and started a series of “did you know…” quiz questions when he got home. One of the surprising pieces of information was that children could be born even when their parents weren’t married. So we had a teaching moment.

Back in the day, our boys learning
superpower skills from their dad

At that time there was a young woman from our church, age 17, I think, who got pregnant and was going through the natural consequences. She was repentant, and wanted to repair her life and set things right. The young man was going off to college in another state, and they realized they did not want to be married. So she worked through the possibility of giving up the baby for adoption, a difficult decision for a young woman. Consulting with her parents, she concluded that placing the child with a married couple who had the same religious beliefs as her family would be best for the baby.

Even with that best-case scenario, the decision was heartbreaking. Then it was made more so when the young man’s parents insisted that, if she was going to give up the baby, they would adopt it, because letting go of a grandchild was unacceptable. In that state, they had the right to override the mother’s decision about who should get to adopt her child. She didn’t want them to raise her child; they might be loving grandparents, but they hadn’t done so well at raising the baby’s father, and she really wanted her child raised in her religion. So she chose to keep the child.

She had loving parents who helped out for several years, allowing her to live with them as needed while she went through nursing school so she could support herself and the child. At the time of the conversation with my son, the decision was made to keep the child, and I believe the child had been born. Economic Sphere and I talked about how the child would be surrounded by people who loved him: both parents would be involved, and all four grandparents. But that child would never have the opportunity to live in a home with both parents at the same time.

It was a major “aha” moment. The starkness of that lack of both parents in the home was very clear—and practically unthinkable. Any child could see that you need both a father and a mother. No other arrangement fills the child’s needs.

Because of the way we lived, and because of the clarity of contrast, we had that opportunity to pass along essential values to a son at a young age—so the decision about risky behavior was made years before teenage hormones could interfere with the brain. That is the power of families. Teaching moments like that come up day by day through the years, continually building the power.

I don’t want single mothers and fathers to feel worse about their situation. They may want the best for their children as much as married mothers and fathers. And there is nothing that says they can’t succeed. There is simply the fact that the odds are against them. Church, neighborhoods, community organizations like sports leagues and scouts can help make up for deficits in single parent families. But only if the social capital cost isn’t overwhelming. In the better neighborhoods, the SuperZips that Charles Murray illustrates, the few exceptions to intact families are easily floated aloft with the strong families. But in the already struggling neighborhoods, there’s not enough social capital to make up for the overwhelming deficit.

The idea that a marriage can always break up if things get tough is a tempting escape. One of the strongest incentives to work on a marriage and make it better comes from growing up in families that stayed together. I find myself feeling grateful that all three of my children married people who came from such families. Mr. Spherical Model and I both came from such parents. And grandparents. And great-grandparents. Our tradition of lasting families is not a guarantee that families will always last, but it is an extra power.

If you want to give your children even more power, practically a superpower in today’s world, save sex for marriage; choose wisely who to marry, stay married forever, and take your children to church with you. And then let your children know the value of the gift you’re giving them, so they will value it in the generations to come.