Thursday, September 28, 2006

Poverty is Society's Default Mode - Don Boudreaux

Don Boudreaux, of Café Hayek, one of the liveliest of Blogs from economists, puts his finger on what Adam Smith was about compared to that other giant in the history of the discipline, Alfred Marshall, (before the locus of major advances in economics passed across the Atlantic). I offer an extract, but you should read the rest of his short piece at:

“The Causes of Poverty?” by Don Boudreaux

“[The Wealth of Nations] written just as the booster rockets for humanity’s great wealth explosion were being ignited, Smith inquired into the nature and the causes of wealth. Smith understood that the phenomenon to be explained is wealth. Wealth doesn't just happen; it is not humanity’s default mode. Wealth must be created; therefore, wealth has causes.

Writing a mere 114 years later, another illustrious economist, Alfred Marshall, wrote on page two of his justly celebrated Principles of Economics of “the causes of poverty.” Marshall wrote these words as part of his explanation of why the study of economics is useful. But writing after the fruits of the wealth explosion began raining down widely, even as astute a mind as Marshall missed the fact that poverty has no causes. Poverty is humankind’s default mode. It’s what exists if we do nothing. “Creating” poverty -- causing poverty -- is no challenge whatsoever.

Escaping poverty has causes – that is, wealth has causes.

This point bears repeating. Poverty has no causes. Wealth has causes.

But capitalism has been so enormously successful at producing widespread material abundance that we today -- like Alfred Marshall in 1890 -- regard wealth as innate to our existence, as our default mode. It is not. The set of institutions that will promote the creation of widespread prosperity is minuscule in number compared to those that prevent people from creating material prosperity.”

I like Boudreaux’s designation of poverty as the ‘default mode’ of society. With an economy of a few paragraphs, Boudreaux conveys the most important idea of what creates wealth, which, absent its creative forces, it leaves people in poverty. Where these creative forces of wealth creation are frustrated, or worse, deliberately suppressed, poverty reigns.

That so many of those who are rightly concerned about poverty and its effects on people are themselves wedded to ideas that perpetuate poverty is one of the most remarkable of paradoxes of history.


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