Tag: poverty

Build, Barbara, Build: Reflections on Nickel and Dimed

Bryan Caplan

I finally read Barbara Ehrenreich’s Nickel and Dimed, and was pleasantly surprised.  Her runaway best-seller is what researchers call “radical ethnography”; to study low-skilled workers in America, Ehrenreich became a low-skilled worker in America.  Ehrenreich mostly just walks us through her experiment: how she found work, where she lived, what the jobs were like, how she made ends meet.  While there’s ideological commentary throughout, she’s less preachy than most of her competition.  My favorite part, though, comes in the final chapter.  Instead of simply complaining about low wages, Ehrenreich talks about the painful pairing of low pay with high housing costs:

Something is wrong, very wrong, when a single person in good health, a person who in addition possesses a working car, can barely support herself by the sweat of her brow. You don’t need a degree in economics to see that wages are too low and rents too high.

The problem of rents is easy for a non-economist, even a sparsely educated low-wage worker, to grasp: it’s the market, stupid.

Confession:

For a second, I was filled with hope that Ehrenreich was going to go full Yglesias and start denouncing our insanely strict housing regulation.  And as I read the next paragraph, the same hope returned:

If there seems to be general complacency about the low-income housing crisis, this is partly because it is in no way reflected in the official poverty rate, which has remained for the past several years at a soothingly low 13 percent or so. The reason for the disconnect between the actual housing nightmare of the poor and “poverty,” as officially defined, is simple: the official poverty level is still calculated by the archaic method of taking the bare-bones cost of food for a family of a given size and multiplying this number by three. Yet food is relatively inflation-proof, at least compared with rent. In the early 1960s, when this method of calculating poverty was devised, food accounted for 24 percent of the average family budget (not 33 percent even then, it should be noted) and housing 29 percent. In 1999, food took up only 16 percent of the family budget, while housing had soared to 37 percent.

Wise observations.  Housing costs have exploded – especially in high-wage areas of the country.  It is very hard for low-skilled workers to afford nice housing.  And superficially, the problem is “the market.”  Prices are high because developers produce so little housing.

Why, though, do developers produce so little housing?  Regardless of their political views, almost any economist these days will blame government regulation.  The physical cost of erecting buildings hasn’t changed much, but the political cost of erecting buildings has skyrocketed.  Serious deregulation would dramatically increase the supply of housing, and sharply reduce its price.  And don’t say, “Only for the rich.”  Much of the regulation on the books – such as minimum lot sizes, height restrictions, and bans on multi-family construction – is consciously designed to zone out the poor.

So when Ehrenreich was decrying housing costs, she could have segued to, “Despite decades of free-market rhetoric, hardly anyone wants to see a real free market in housing.  Yet almost nothing else would do more for the working poor.”  Furthermore, she could have so segued without breaking character.  There is no good reason why Ehrenreich couldn’t think everything else she thinks and advocate the abolition of a bunch of laws that deprive the poor of affordable housing.

Alas, she said this instead:

When the rich and the poor compete for housing on the open market, the poor don’t stand a chance. The rich can always outbid them, buy up their tenements or trailer parks, and replace them with condos, McMansions, golf courses, or whatever they like. Since the rich have become more numerous, thanks largely to rising stock prices and executive salaries, the poor have necessarily been forced into housing that is more expensive, more dilapidated, or more distant from their places of work.

This is plainly false.  In a free market, the poor totally “stand a chance.”  Given current prices and twenty acres of land, developers would much rather erect a massive apartment complex than twenty single-family homes.  In desirable areas, however, getting such permission is almost impossible.  And while developers will build in remote locations if they must, most would far prefer to build up in urban centers.  Why don’t they?  Because getting permission to make your building taller is like pulling teeth.  For every skyscraper under construction in NYC, just picture all the landlords who would build a skyscraper of their own if the zoning authorities handed them permission.

What then is Ehrenreich’s solution?  More government spending:

When the market fails to distribute some vital commodity, such as housing, to all who require it, the usual liberal-to-moderate expectation is that the government will step in and help. We accept this principle-at least in a halfhearted and faltering way-in the case of health care, where government offers Medicare to the elderly, Medicaid to the desperately poor, and various state programs to the children of the merely very poor. But in the case of housing, the extreme upward skewing of the market has been accompanied by a cowardly public sector retreat from responsibility. Expenditures on public housing have fallen since the 1980s, and the expansion of public rental subsidies came to a halt in the mid-1990s.

I can understand someone saying, “Deregulation isn’t enough.”  But you could double the supply of public housing without making a noticeable dent in the housing shortage.  Rent subsidies are much easier to scale up, but subsidizing demand without increasing supply is almost the definition of crazy policy.  Furthermore, if you want to create high-paid job opportunities for non-college workers, a rapidly growing construction sector is a dream come true.

You could interpret all this as a “gotcha,” but I strive to be positive.  Yes, Nickel and Dimed overlooked the fact that government grossly deprives the working poor of affordable housing.  As far as Google knows, Ehrenreich’s continued to overlook this fact.  What’s important now, though, is that she could and should join the long list of left-leaning thinkers who champion deregulation of housing.

So how about it, Barbara?

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Monopolize the Pretty Lies

Bryan Caplan

Why do dictators deny people the right to speak freely?  The obvious response is, “The truth hurts.”  Dictators are bad, so if people can freely speak the truth, they will say bad things about the dictator.  This simultaneously wounds dictators’ pride and threatens their power, so dictators declare war on the truth.

But is this story right?  Consider: If you want to bring an incumbent dictator down, do you really want to be hamstrung by the truth?  It’s far easier – and more crowd-pleasing – to respond to a pack of official lies with your own pack of lies.  When the dictator claims, “I’ve made this the greatest country on earth,” you could modestly respond, “Face facts: we’re only 87th.”  Yet if it’s power you seek, you might as well lie back, “The dictator has destroyed our country – but this will be the greatest country on earth if we gain power.” Even more obviously, if the current dictator claims the sanction of God, the opposition doesn’t want to shrug, “Highly improbable.  How do you even know God exists?”  Instead, the opposition wants to roar, “No, God is on our side.  Our side!”

What then is the primary purpose of censorship?  It’s not to suppress the truth – which has little mass appeal anyway.  The primary purpose of censorship is to monopolize the pretty lies.  Only the powers-that-be can freely make absurdly self-aggrandizing claims.  Depending on the severity of the despotism, you may not have to echo the official lies.  But if you publicly defend alternative absurdly self-aggrandizing claims, the powers-that-be will crush you.

Why, though, do dictators so eagerly seek to monopolize the pretty lies?  In order to take full advantage of their subjects’ Social Desirability Bias.  Human beings like to say – and think – whatever superficially sounds good.  Strict censorship allows rulers to exploit this deep mental flaw.  If no one else can make absurd lies, a trite slogan like, “Let’s unite to fight for a fantastic future!” carries great force.  Truthful critics would have to make crowd-displeasing objections like, “Maybe competition will bring us a brighter future than unity,” “Who exactly are we fighting?,” or “Precisely how fantastic of a future are we talking about?”  A rather flaccid bid for power!  Existing rulers tremble far more when rebels bellow, “Join us to fight for a fantastic future!”

George Orwell has been a huge influence on me.  When you read his political novels, you often get the feeling that dictators fear the truth above all.  If only Winston Smith could take over the Ministry of Truth and tell all Oceania that it needlessly lives in poverty and fear.  In the broad scheme of things, however, unvarnished truth is only a minor threat to tyranny.  After all, rulers could respond to ironclad fact with a pile of demagoguery: “Smith is slandering our great country!”  “He’s a willing tool of Eurasia!”  Or even, “We’re not rich because the greatest country in the world is too proud to sell itself.”  The real threat to the regime would be a rival set of demagogues offering Utopia after a brief bloodbath sends a few wicked, treasonous leaders straight to the hell that they so richly deserve.

Doesn’t this imply that free speech is overrated?  Yes; I’ve said so before.  While I’d like to believe that free speech leads naturally to the triumph of truth, I see little sign of this.  Instead, politics looks to me like a Great Liars’ War.  Viable politicians defy literal truth in virtually every sentence.  They defy it with hyperbole.  They defy it with overconfidence.  They defy it with wishful thinking.  Dictators try to make One Big Political Lie mandatory.  Free speech lets a Thousand Political Lies Bloom.

Yes, freedom of speech lets me make these dour observations without fear.  I’m grateful for that.  Yet outside my Bubble, dour observations fall on deaf ears.  Psychologically normal humans crave pretty lies, so the Great Liars’ War never ends.

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Universal Basic Income is a Totalitarian State’s Dream Scheme

Thomas L. Knapp

Andrew Yang’s small but solid polling in the Democratic Party’s 2020 nomination race shows that “Universal Basic Income” has gone from a fringe idea to an idea with a foothold in the popular consciousness.

Supporters of a basic income span the political spectrum and the economic upheavals of the 21st century — especially fears that automation will increasingly replace human workers — are likely to fuel its journey to the center of policy discussions over the next few years.

A guaranteed income for the masses isn’t here, but it may well be coming. That’s a bad thing.

Let’s assume that the problems a UBI seeks to address are real, vexing, and intractable: That this generation of automation, unlike past iterations, will destroy more jobs than it creates and lower rather than raise wages.

Let’s also assume that a universal income guarantee at, say, the poverty line would cost less and address those problems more efficiently  than expanded versions of existing welfare programs.

Those assumptions, correct or not, leave out one major problem that a UBI would create rather than solve. The problem, put simply, is that a Universal Basic Income would quickly turn into an iron-fisted tool of social and individual control by the entity writing those monthly checks (the government).

A Universal Basic Income wouldn’t be “universal.” Some exclusions (for example, prison inmates) would almost certainly be baked into it from the start. Others would quickly follow. Are you a FORMER felon? Is your name on a sex offender registry or no-fly list? Are you behind on child support or late filing a tax return? Do you make “too much” money above the UBI? Did you fail a random drug test?

Suppose you don’t fall into any of those categories. You’re an upright citizen. The UBI hits your bank account reliably every month. You come to depend on it, even if you’re otherwise employed. It takes the edge off poverty or covers the little extras you’ve become accustomed to.

Then your paymasters in Washington announce that unless Policy X is implemented, the UBI will regrettably have to be eliminated, or cut, or a cost-of-living increase skipped.

Policy X might be one of the exclusions mentioned above. Or it might be something seemingly only tenuously, if at all, related to the UBI itself. A trade war, even a shooting war, premised on an economic downturn being another country’s “fault.” Another housing crash, necessitating another bailout of banks and investment houses with cockamamie trading policies.  You name it, politicians will figure out a way to weaponize an income guarantee to get you on their side of it.

So, do you Support Policy X and the politicians advocating for it, or risk that monthly income guarantee to support what you really think is right?

Maybe you’re a person of principle. Maybe you’ll stand up for what’s right even if it costs you. But will your neighbors?

The cost of a UBI would be total state power. And that would be a terrible deal to take.

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UBI: Some Early Experiments

Bryan Caplan

The Universal Basic Income is only a tangential interest of mine.  Yet when I’ve debated it, I’ve been consistently impressed by how little the eager advocates try to teach me.*  Case in point: I learned more from reading three paragraphs in Kevin Lang’s Poverty and Discrimination than in my typical conversation with a UBI enthusiast:

Because the stakes involved in instituting a negative income tax were so high, policy analysts convinced the federal government to conduct experiments in which some people were randomly assigned to be eligible for the negative income tax while others were randomly assigned to remain subject to traditional welfare. In the experimental group, there was also variation in the generosity of the program. Four experiments were conducted in the United States and a fifth in Canada. The largest of these is known as SIME/DIME (the Seattle Income Maintenance Experiment / Denver Income Maintenance Experiment).

Many policy analysts found the results of the experiments disappointing. Although the labor supply response was modest, it added substantially to the cost of the program. Depending on the generosity of the program evaluated in SIME/DIME, the labor supply response could account for over half of the costs. The least generous program would save $4 billion but would make 95 percent of recipients worse off. A program that would guarantee support at the poverty level and tax-back benefits at a rate of only 50 percent would still make one-fourth of recipients worse off and would exceed the cost of the welfare program then current by $30 billion, an enormous increase.

There were also some “unintended consequences,” the social science equivalent of medical side effects. In particular, the divorce rate rose among recipients randomly assigned to the negative income tax. The combination of the costs of the labor supply effects and the effect on marriage led Senator Daniel Patrick Moynihan, an early supporter of the negative income tax, to withdraw his support.

If I were an enthusiastic UBI advocate, I would know this experimental evidence forwards and backwards.  Almost all of the advocates I’ve encountered, in contrast, have little interest in numbers or past experience.  What excites them is the “One Ring to Rule Them All” logic of the idea: “We get rid of everything else, and replace it with an elegant, gift-wrapped UBI.”  For a policy salesman, this evasive approach makes sense: Slogans sell; numbers and history don’t.  For a policy analyst, however, this evasive approach is negligence itself.  If you scrutinize your policy ideas less cautiously than you read Amazon reviews for your next television, something is very wrong.

*Exception: Ed Dolan

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Let People Find Their Own Solutions

Kent McManigal

It amazes me how often people create worse problems while trying to solve problems.

Most problems can be solved; some probably can’t. Don’t give up trying to solve the hard problems, though. You never know if the Elixir of Life is waiting for you to discover just around the next bend.

The best approach is to let people find their own solutions. Most of their ideas will fail; some will be spectacular failures, but as long as no one’s solution is forced on everyone else, people can keep trying different things. The more ideas that get tried, the more problems will be solved.

Often you won’t know if an idea is good until you let people try it for a while. Then, if it turns out badly, the people need to be free to drop it.

Even some of the bad ideas might have the seed of a real solution, just needing a little tweak to work. It’s only when you set a bad idea in stone — or in law — that it becomes hard to reverse.

When you force a one-size-fits-all “solution” on everyone, a bad idea can do lasting damage.

Most proposals for solving anthropogenic global climate change — “global warming” — are like this. Whether the crisis is real or not matters little. Let people try the ideas they believe will help, but don’t let them impose those solutions on anyone. This would limit what others can try and is almost guaranteed to prevent a real, lasting solution from being discovered. If one is needed.

The most tragic examples are when someone causes more of the social problems they imagine their ideas would address. Things like poverty and crime come to mind.

If your anti-poverty program hasn’t resulted in a measurable easing of poverty it’s time to drop it and try something else. Many times, doing nothing would be better than what is being done.

Crime is another topic where this applies. Of course, I’m referring to real crime — violations of life, liberty, and property — not acts that harm no one other than the feelings of politicians.

I believe, from personal experience and observation, that universal voluntary gun possession would prevent most crime. Others believe a total gun ban (exempting government employees) would be the fix. Only one of those doesn’t rely on forcing a rights-violating, one-size-fits-all approach on every individual in society, so only one is ethical.

If your idea isn’t ethical, I’ll pass, no matter how well it works. With this one limit, find your best ideas.

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The Universal Basic Income: Newly Contentious

Bryan Caplan

The Universal Basic Income (UBI) was the topic of my other “Contentious Issues in Classical Liberalism” presentation.  Here, at least, I can see the superficial appeal for the typical member of the Mont Pelerin Society.  Unlike the conventional welfare state, the UBI doesn’t try to micro-manage human behavior.  It doesn’t claim to know how anyone – no matter how poor – should live their lives.  It gives bureaucrats near-zero discretion.  And it preserves recipients’ marginal incentives to work.  The UBI gives money to everyone, then lets the free market work.

What do these arguments overlook?  For starters, since taxpayers have to support the UBI whether they like it or not, the moral presumption in favor of recipients’ “choice” is more than a little muddy.  Voluntary donors get to decide how their money gets spent; why shouldn’t involuntary donors have the same right?

On reflection, moreover, there are strong reasons for taxpayers to exercise this right.  Most obviously, because their first priority is to take care of children.  “You can’t use food stamps for alcohol” need not be paternalistic; maybe it’s just a pragmatic way to feed the hungry children of alcoholic parents.

Poor parenting aside, the very fact that an adult needs government help is good reason to question their personal responsibility.  If you want to sleep on my couch while you search for a job, I refuse to “just trust your best judgment” about how to get your life in order.  Anyone who wants my help has to strive to find a job, not sit around drinking my wine.  It’s hard to see why taxpayers should be more relaxed (though due to the tragedy of the fiscal commons, they almost always are).

The main reason why classical liberals smile upon the UBI, I fear, is its elegant simplicity.  If we adopt one straightforward poverty program, we can rid ourselves of all the rest.  Unfortunately, as my presentation explains, the UBI’s cost is exorbitant, the side effects are awful, and the moral justification is ultimately flimsy.  The right moderate reform for classical liberals to push is not the UBI, but Austerity for Liberty.

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