Uncommon common sense on welfare and poverty

by on November 18, 2004 at 6:42 am in Economics | Permalink

From Jane Galt, read the whole thing.

For me the most intriguing passage (but not the central point) is:

Something that conservatives, and especially libertarians, have been slow to grapple with is that the more productive our society gets, the greater the possibility that some peoples’ labour simply isn’t productive enough to support them at a minimum level. Can we really tell former welfare mothers to go bunk ten to a room the way my Irish ancestors did? We’re a pretty rich country. Are we comfortable telling people to live as if they’re nineteenth century peasants, if their cognitive gifts, or education, won’t stretch to more?

I wonder whether increasing wealth will ever eliminate the case (sound or not) for, say, welfare payments or the public funding of education.  Won’t the U.S. at some point, however near or distant, become rich enough so that government won’t have to…fill in the rest of the sentence yourself…?  Or does growing wealth jack up land prices so much that subsistence becomes increasingly harder to achieve?  I’m not talking about a relative status effect here, or changing expectations as to what is a decent life (though those factors play a role too).  To some extent higher real wages also boost the cost of producing human beings (i.e., raising children), analogous to William Baumol’s "cost disease."  You can raise a family of seven in Mexico on one thousand dollars a year, just try that in Fairfax County.  And might further economic growth only exacerbate this contrast?

Some mid-level developing countries address this problem by allowing shantytowns to spring up in or near their major cities.  The wealthy live in the "normal" city, the poor in the shantys.  There are other ways of setting up parallel colonies on low-wage land.  Randall Parker writes of old people moving to low-cost cruise ships (no, not ice floes), and of course many of the elderly migrate to Mexico or Costa Rica.  The default of course is to keep everybody in the higher-rent, higher-value network, and not coincidentally raise general taxes over time.  We will all continue to pay lip service to the integrationist ideal, but let’s say you think the case for welfare will never go away, no matter how wealthy we become.  This view implies that the pressure for "separate colonies" will only increase over time.

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