Saturday, January 27, 2007

Tyler Cowen is Right: Absolute Poverty kills, Not Inequality

A ‘left of centre’ Blogger manages to make an ‘ageist’, racist, ‘sexist’ and ‘tenure-ist’ slur on somebody who expresses a view with which he disagrees on ‘Angry Bear’, a Blog billed as: ‘Slightly left of centre economic commentary on news, politics, and the economy’:

“Tyler Cowen Makes Two Mistakes”

Then follows the quotation from Tyler Cowen’s posting discussed by me in my previous posting, after which we have this stunning ‘commentary’ by Steven Kyle (aka Angry bear'):

To this, I can only say that it takes a white middle aged economics professor with tenure to come up with a statement like that.... [I]n the real world [inequality] makes people distrustful of the system and causes them to lose faith in the fairness of society. General belief in the social contract is a long term asset to us all and one we should be very worried about losing. Only a very narrow view of the world could conclude otherwise...”

To which a comment is added by ‘dale’ on Brad Delong’s Blog which also posts the piece from Angry Bear:

“in the real world inequality kills”.

Angry bear has got it the wrong way round. Only a “very narrow view of the world” sees the cause of poverty to be inequality. Poverty is the absence of wealth (‘the annual output of necessaries, conveniences and amusements of life’). Poverty cannot be removed by redistribution – would that it could; what a painless solution that would be! Redistribution alleviates poverty but does not eradicate it. Indeed, in practice in the real world, redistribution on a social scale even within one country (big or small) does not eradicate poverty and it has every possibility that it will reduce inequality by making everybody worse off (except the governing elite).

Wealth is a flow, not a stock. If the flow is interfered with by wholesale confiscation, the disruption, not to say social-tension, has dramatic effects on the flow. It usually means violence, destruction of the stock of property (some of it mindless) and a switch of personnel between the formerly super rich and the former middle ranks. As the total GDP falls, it is clear that it is not the panacea that is claimed for it by militant theorists and morally indignant ‘left of centre’ commentators (who themselves – excluding the occasional saint- are, or aspire to be, ‘tenured middle-aged economics professors’, or similar ranked professionals).

The theory behind “Angry Bear’s” presumably ‘broad view of the world’ is that the super rich are the problem, even its cause, and that zero-sum redistribution will get the absolute poor out of the ghettos, slums and shanty towns of the world. If this is to be done quickly (and the depth of their feelings suggest it must be) there will be violence. Democratic institutions suggest it would be done more slowly, perhaps by penal taxation, assuming these institutions agree on how redistribution is to be implemented (and from whom to who) and from which segment of society. Redistributing all of their property would still not raise enough to make much difference to the living standards of the poorest segment, even assuming the property of the super rich could be ‘sold’ (to who?’; ‘Angry Bear’?) and the income flow parcelled up and given to families of the poor.

And what happens if after the first years of redistributed property we need to continue redistributing sufficient to make a difference? Work down the economic scale? But who is buying the depleted property stock and maintaining it from wear and tear between each round of redistribution?

Moreover, how does this help the several billion poor in the non-developing countries? Where is the wealth flow coming from to eradicate their poverty? What happens to countries and their governments which decide to opt out of Angry Bear’s plan for the eradication of world poverty (did his majority in the US democratic system get re-elected?)

Angry Bear considered that ‘inequality makes people distrustful of the system and causes them to lose faith in the fairness of society’, which is well short of the charge made in “dale’s” comment (Brad Delong’s Blog) that “in the real world inequality kills”.

You can see here the creeping drift towards extremism, a normal condition of people who believe in ‘systems’, against which Adam Smith had some sharp words in Moral Sentiments (TMS IV.11.2.10-18: pp 231-34). Angry Bear should read these passages carefully (and ‘dale’ too). They carry explicit warnings about beliefs (right or wrong, it makes little difference) being introduced that have unpleasant outcomes despite the protestations of the true believers about their good intentions, their moral credentials and the self-proclaimed certainties that they mean no harm.

Inequality does not kill; absolute poverty kills. It kills children by the millions who do not live long enough to know they are alive. It shortens the lives of people not able to draw wealth even from primitive agriculture, and who cannot get into wealth-creating activity in market economies, not because these modes of production are unknown, but because they are not functioning in economies that are not developing for all the reasons we know about.

To the extent that
people living in Europe and North America impose tariffs on imports (and allow their governments to continue to do so) they prevent wealth creating income flows to the poorest countries that would not just alleviate poverty but set them on the road to sustainable development.

Neither Angry Bear nor dale (nor, apparently, Brad Delong) sees that they too are implicated in the continuance of the problem. If I may say so, they take ‘a very narrow view of the world’ and their places in it.

Tyler Cowen on this issue is right: relative poverty is less important than absolute poverty (a condition that Smith drew attention to in his unfavourable comparison between the ‘Indian’ prince and his subjects, and the meanest day labourer in Scotland and ‘the extravagant luxury’ of his prince. From the division of labour, the day labourer benefited from the inequality of his income and his prince’s, while the destitution of the ‘naked’ subject of the ‘Indian’ prince was so mean compared to his prince, as to invite the conclusion that the inequality of the day labourer was preferable (WN I.i.11: p 23-4).

It wasn’t and isn’t inequality that causes people to ‘lose faith’ in the ‘fairness’ of markets; it’s their exclusion from participating in markets (an exclusion in which Angry Bear, dale, and Brad Delong are complicit). When given a choice – even one beset with high risks of loss of life – people outside the unequal USA and Europe make extraordinary efforts to get into these continents to participate at any level of inequality in these continents.

I sometimes think that these uneducated victims of absolute poverty are smarter than some of those educated at the best universities, which hire the best tenured professors in the world.

All three critics of Tyler Cowen, presumably, have read Book I of Wealth of Nations, perhaps even Book IV of Moral Sentiments; if they have they have no excuse for critiquing Cowen on this issue; if they haven’t they should do so quietly and then admire the good sense of the ‘illegal’ immigrants.


Blogger TabooTruth said...

Absolutely. We need to be able to distinguish between the looting rich (which is a very small percentage who get significant media coverage) and the productive rich.

Just look at the history of nationalizations and welfare policy to see whether redistribution helps.

2:34 am  

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