Words of wisdom

Lant Pritchett’s new working paper, “Alleviating Global Poverty: Labor Mobility, Direct Assistance, and Economic Growth” should be required reading for every Effective Altruist.  Bottom line: Virtually all poverty reduction comes from economic growth and migration – not redistribution or philanthropy.

That is from Bryan Caplan.

Comments

How about we constraint the poor -the africans- to have fewer kids? That would increase wealth per capita, support for open borders, and so many other things that seem so desirable.

Already happening. But yes helping to make it happen faster is a good idea.

@msgkings -did you not see the nyn name, bigot? That was meant to be ironic. Whoosh, right over your flat top.

Wrong again, Ray. Check out Shahid's reply below. Having fewer kids is definitely a good idea for the very poor.

Projection noted. Your kids heard playground taunts like "too bad they couldn't protect your mom from your dad".

What were you doing at my kids' playground yelling at them? You could have been arrested!

His kids, or his girlfriend?

@Bigot. I agree, although I am sure a lot of people would roll their eyes over your suggestions. The truth is that what you suggest is one of the most effective ways to control poverty. China is perhaps the best example of this. Had it not been for strict birth control enforcement, God knows that their per capita income would have been much lower.
Here, in my country, poverty is quite high. Yet the poor still have 5 to 7 kids on average, which doesn't leave any room for productive spending on kids in terms of education and health. It's quite surprising, also, that donors and foreign governments who give aid don't want to talk about this elephant in the room. Not sure why they do that, but my guess is that a lot of consultancies are at stake and their continuation would depend upon keeping poverty related assistance intact for as long as possible.

I used to think in the same manner but pl do read atleast a summary of Mahmood Mamdani's "The myth of population control..." to see why our middle-class rationality may not necessarily apply to the poor.

In 1819 William Cobbett wrote an answer to the propositions put forward by Thomas Malthus in his Principle of Population.

An excerpt: ". . . when the people come to an agreement to desist, for their mutual benefit, from using their cunning and strength at their sole will and pleasure; when the strong man agrees to give up the advantage which nature has given him, in order that he may enjoy the greater advantage of those regulations which give protection to all, he surely must be understood to suppose, as a condition, that no state of things is ever to arise, in which he, without having broken the compact on his part, is to be refused, not only protection from harm, but even the bare means of existence.
The land, the trees, the fruits, the herbage, the roots, are, by the law of nature, the common possession of all the people.
. . . . . . . . .
But still the property, in land especially, can never be so complete and absolute as to give the proprietors the right of withholding the means of existence, or of animal enjoyment, from any portion of the people; seeing that the very foundation of the compact was, the protection and benefit of the whole. Men, in agreeing to give up their rights to common enjoyment of the land and its fruits, never could mean to give up, in any contingency, their right to live and to love and to seek the gratification of desires necessary to the perpetuating of their species. And, if a contingency arise, in which men, without the commission of any crime on their part, are unable , by moderate labour that they do perform, or are willing to perform, or by contributions from those who have food, to obtain food sufficient for themselves and their women and children, there is no longer benefit and protection to the whole; the social compact is at an end; and men have a right, thenceforward, to act agreeably to the laws of nature.

I agree. Back home, we also need strict birth control in poor red states. Its the best way to raise per capita GDP there too.

EVIL!

You are calling for killing babies in the womb, like the godless red commies.

Trump campaigned on increasing the number of babies born globally.

Then wonders why so many kids try to get into the US by zany means.

As a kid, Democrats were more likely Catholic which promoted lots of kids, so it was the GOP promoting family planning, which relied a lot on abortion, especially in Africa, Latin aka Catholic America, Asia.

It was my generation the grew up with "the pill" and long hair on both men and women, which was a freak flag for both. Free love must have seemed like socialism to the GOP, sex without cost. No longer the punishment of shotgun weddings for enjoying sex.

The GOP is constantly fighting family planning in the US and elsewhere in the world.

But the GOP blames children for their bad choice of being born poor. Or outside the US.

Some win-win ideas
1 - Cash for sterilization
2 - Forbiding marriage for children under 16
3 - Mandatory schooling until 18
4 - Lowering status of house wives (just a fraction of what has been done in the West)
5 - Incentivizing urbanization
6 - Penalizing parents for child malnutrition and neglect

All of these ideas were adopted in the west to give the state more control over its citizens, if you read Francis Fukuyama's books you'll see why. Even Catholic priest being required to be celebate was a form of state building he says. One reason a lot of very skilled Western women never have kids I might add, and the fertility rate has dropped to below replacement level in Scandanavia. Pity, since blond girls are so cute.

My pet project is to make citizenship conditional, like in Greece, on good behavior. If you're bad, you're shipped to say Liberia. Or voted 'off the island' for a year or more. I vote msgkings off this board, vamos!

Ray, you don't need to be obsessed with me just because I call you on your bullshit. I'm actually a fan of your schtick.

He’s just mad the wife he paid good pesos for turned 18?

Heh. Trolls just hate to be trolled back.

Hey Bigot-Lowering status of house wives!? Is this guy serious or just trying to get a rise of readers? He must be a dude. Parents are already being punished for malnutrition and neglect; it's called Child Protective Services. have you heard of reproductive rights? These jokes are funny. Good luck with yourself, bigot.

Bigot is a self-loathing college-aged incel. He couldn't get a date for Friday night, so he's on a mission to get back at society.

Increases in inequality have a negative impact on economic growth. Yes and no. Research finds a difference between relatively rich countries and poor countries: rising inequality in relatively rich countries negatively impacts economic growth while rising inequality positively impacts poor countries. Seems logical, at least with respect to poor countries: the accumulation of capital resulting from rising inequality provides the capital for investment and hence growth. To be clear, I am not a redistributionist. My focus is on the potential negative impact of high levels of inequality, including on both economic growth and financial stability. Some economists refuse to recognize this when the evidence is overwhelming. And, unfortunately, right in front of us.

I agree with Cowen and the lesson in his new book: economic growth is the answer, maybe the only answer, to solving our social, political, and economic problems.

If you are not a redistributionist, are you proposing any remedy to high levels of inequality? Or just noticing it over and over and over?

Kuznets is rolling in his grave.

Another swing and a miss Rayward.

Also the theory of causality weeps.

Senator McConnell is proposing cuts in social security and Medicare, while deficits are soaring as the result of the recent tax cut directed mostly at the wealthy. And inequality keeps rising. McConnell is banking on a repeat of the 1980s, when Republicans "saved" social security with a large tax increase on working Americans (the payroll tax) that partially offset the tax cut for wealthy Americans (the income tax). And why shouldn't he: it worked before. Where's that $3 trillion social security trust fund that was created by the tax increase on working Americans? No, Trump didn't steal it, but only because he found out it doesn't exist.

"Senator McConnell is proposing cuts in social security and Medicare, while deficits are soaring as the result of the recent tax cut directed mostly at the wealthy. "

Most of the projected deficit spending over the next 10 years is because of Social Security and Medicare spending. The tax cuts are comparatively insignificant.

Really its Medicare (and Medicaid) but the only way out is death panels so...
¯\_(ツ)_/¯

So change social security to be means tested, up the age limit, and force everyone to max their 401k.

But pretending social security is mostly about poverty and inequality is absurd. It’s a transfer from workers to retirees with assets.

Not really, for many SS is their primary (or even only) source of retirement income.

Fair enough. Mea culpa, almost half rely on social security but for 50% of their income.

Maybe we can only reduce it by 30%? That’s $300 billion.

And eventually replace another 30% with forced contributions to retirement accounts.

I'd happily support a mandatory 4-6% payroll retirement account deduction. That would easily provide a long term fix for SS (but wouldn't deal with the current 30 year nadir).

Those with significant income in addition had a pension for a good portion of their work years, which might have been replaced with a 401K at similar employer cost in the 80s, all before half of workers saw income declines and the other half income increases.

Going forward, half will be living on SS alone unless they are able to work, which will depend on public assistance like subsidized transit to get to jobs on transit lines. Less than $30k income per year does not allow any retirement savings.

rayward,

The Social Security Amendments were passed into law in 1977 by a Democratic Congress and signed by a Democratic President.

It's true that the Reagan Administration accelerated the timing of the SS tax increases a couple years, but this is pretty small beer compared to the landmark and responsible 1977 legislation that made a significant dent in the Ponzi aspect of the program.

We need a similar change now, because people continue to live longer. Modest reductions that don't affect cohorts at or near retirement.

On the Medicare side in the past 30 years, we saw (a) an increase in the wage base to $125,000, followed by (b) complete removal of the wage base, followed by (c) an increase in the tax from 2.9% of pay to 3.8%, followed by (d) extending the 3.8% Medicare tax to unearned income. Repeated incremental increases in the tax. Also responsible, because Medicare is a financial shitshow in the making, but lots of this happened under the aegis of the GOP.

Why do you hate workers earning sorta decent wages?

Why do you want people homeless, hungry, sick, then dead, fewer people working, and GDP smaller?

Or do you think old people universality have millions in the bank.

The 20s and 30s began the end of the large multigeneration household that produced a lot of household consumption on the farm, or at least the garden, and food preservation.

Migration for opportunity, the greater production demanded by government in factories placed all over the nation by Congress split up the multigenerational households.

Social Security replaces the kids moving in to support parents or grandparents, or the opposite.

I remember the three generation households in the 60s, with living room turned into bedroom. By the 80s, I knew of no one like that. Some wealthy friends built nice apartments attached to large houses they lived in with two kids.

Today, it's the grandparents on social security taking in the kids of their kids who are homeless or in jail or working in some remote place, say the military.

Just glancing through the first few pages, but it seems obviously flawed. It assumes that a migrational wage gain is an absolute. When clearly it's not.

If you drastically increase migration from the third world to the first world, the supply of unskilled labor would climb and the wages for unskilled labor would drop. That's pretty basic economics.

The author does mention this argument on page 16, but he just hand waves it away.

"First, nothing I have said is about “open borders” it is about “more mobility” and the calculations are all about manageable increases—like 3 percent of the labor force increases—that would be hard to suggest would undermine A starting from given levels. "

A more accurate description would be:

" Virtually all poverty reduction comes from economic growth and migration – as long as you restrict it to a 3% labor force increase!"

Hey, you should be more of a team player!

I think it is a fair point that he is only working at the margin.

But think of it this way: According to the paper, if immigration policy A lets in 1 million more "poor" than policy B, but we need to move 10 billion / year in foreign aid to the "poor" back to the domestic budget to make A and B politically neutral, we should go for A, at least as far as helping those poor go.

All things being equal I would agree, but these papers never seem to fully factor in the effects of the downward pressure on existing low skilled wages.

The evidence of downward pressure on the wages of low skill workers is pretty weak actually. People assume it must be true, but the empirical evidence just isn't there. Borjas' paper is perhaps the best (only?) evidence for this, but it has several fatal flaws.

Also, considering we are talking about orders of magnitude differences, the downward pressure on low-skill wages, even at very high estimates, will still leave immigration as a vastly superior alternative to poverty reduction when compared with philanthropic enterprises.

"The evidence of downward pressure on the wages of low skill workers is pretty weak actually. . People assume it must be true,"

It's a basic supply and demand curve. You increase the supply of a good and the price goes down. Yes, people assume it's true, ... because it's a fundamental aspect of economics.

"Also, considering we are talking about orders of magnitude differences, the downward pressure on low-skill wages, even at very high estimates, will still leave immigration as a vastly superior alternative "

Did you forget to multiply the downward pressure by the entire population effected? If you measure the downward pressure of just 1 person the effect is small. When you multiply it by the regional workforce that's a different matter.

You can call it fundamental all you want, but empirical evidence of immigration causing negative downward pressure on wages is shaky at best. The world is not Econ 101, that's why there are upper and graduate level economics courses.

I did not forget to apply the effect of downward pressure to the entire population affected, but that downward pressure would still have to be very large to eat all of the benefits to the immigrants. Considering we don't have good evidence that it is even a negative effect, let alone a large one, we can safely assume that those negative effects will be smaller than the negative effect of taxing that same workforce and transferring that money to the potential immigrants in their home countries.

In response to your defense of Borjas below, you should really read Lant's response to his paper here:
https://www.cgdev.org/blog/labor-mobility-and-wages-rich-country-poor-part-one-analysis-implications-mariel-boatlift
and here:
https://www.cgdev.org/blog/rich-country-labor-mobility-and-low-skill-wages-instruments-targets

The big point being, even given Borjas's numbers, immigration is still clearly a better idea than aid. But also Borjas's numbers are not reliable.

" The world is not Econ 101, that's why there are upper and graduate level economics courses."

In engineering you learn the Law's of Thermodynamics the first year. ... And they never change.

I'm not necessarily disputing your assertion, but it's an indicator that Economics is a soft science.

" but that downward pressure would still have to be very large to eat all of the benefits to the immigrants."

True, the numbers from Borjas indicate that only 30% of the low skilled immigrants wages are coming from the rest of the existing low skilled population. (10% increase in low skilled immigration drops the wages by 3%).

Maybe we could tax all low skilled immigrants an additional 30% and pass that money onto the existing population? That would seem to be fair.

"The big point being, even given Borjas's numbers, immigration is still clearly a better idea than aid."

Ok, but that's a false dichotomy. Those are two completely independent parameters. I could chose to do either, none or any combination.

Thanks for the Lant Pritchett links. The guy is a major prick who is trying to call people who disagree with him racists. It's always good to know what motivates people.

"Borjas' paper is perhaps the best evidence for this,"

Yes, though George Borjas has more than one paper on the topic. And clearly there is some empirical evidence as indicated by Borjas' paper.

http://www.uh.edu/~adkugler/Borjas_2003.pdf

https://www.nber.org/papers/w21588.pdf

Here's a piece from David Frum that covers the back and forth of the narrative.

https://www.politico.com/magazine/story/2016/09/trump-clinton-immigration-economy-unemployment-jobs-214216

A better take on this paper.

NGO's should invest all of their donations into First World Stock ETFs and then distribute 5% of the total every year into direct cash transfers to the third world poor.

There was surprisingly a recent negative report about a study showing direct cash transfers not having made a significant difference in the long term compared toa non-cash transfer group.

What didn’t increase was their income. They still had better houses, better goods. Safe to say marginally better lives.

If more income translated into an accumulation of capital in Africa , then Africa would be europe or east Asia.

Why limit this to effective altruists? Seems like everyone who is bullish on redistribution could stand to benefit.

It is interesting though. Effective altruists might save a few thousand lives next year with vaccines. Is someone saying "don't do that because in the long run economic development will help more?

Fine, but you just failed to save a few thousand in the short term.

I was talking about redistribution, not vaccines.

I would think most people classify the Gates Foundation as redistribution.

Maybe; I was thinking more of straight cash transfers, like Tyler giving his book money to some African dude.

What separates economic science from economic pseudoscience, is selective measurement of changes in capital.

Labor mobility turns out to be one of the WORST POSSIBLE means of altering poverty.

Bring capital and rule of law to people, not people to capital and rule of law.

I only glanced, wearing the wrong glasses, but it looks like welfare is GDP in this piece and not life expectancy?

IMO a fair approach is to balance both. As in "live long and prosper."

One either brings rule of law and capital to people (colonialism) or one brings people to rule of law and capital (reverse-colonialism).

The only choice is whether you colonize and increase world institutional capital, or are colonized and consume world institutional capital - while claiming you've made an increase in productivity rather than consumption.

The idea that institutional capital is consumable is specifically addressed in this paper. If you read papers before stating your opinion both you and people reading the comments will benefit.

So, in other words, you are jumping to the conclusions that (a) I did not read the paper (b) did not read the comments, and (c) am arguing against a presumption of the paper's contents, rather than what I am doing here, and always doing: "Staying On Message" by REINFORCING the argument in simple declarative terms; and reiterating that what separates economic science from pseudoscience is measuring the unseen in toto, rather than deriving general rules of arbitrary precision by cherry picking measurements (ie: Krugman, Stiglitz, DeLong, et al) and inventing optimistic causality (moral hazard expansion).

The author is attempting (not terribly successfully), to illustrate the trade offs without outright stating (in the paper's Abstract) the lesson he wishes to reinforce. For my followers, I'm illustrating that central principle and using the paper as an example.

( I don't make many mistakes in my criticism of economic methods. And this isn't one of them. )

-Cheers ;)

"Staying On Message" is not the same as ignoring the author's arguments. If you read the paper and this is the best response you could come up with, then he wins the argument because you didn't address his response to your argument at all.

..."not redistribution or philanthropy."

Contrary to a stubborn attachments "marginal revolution" distribution.

The ultimate poverty reduction is the extinction of all humans. No more pepole = no more poverty. Problem solved.

If you think this is a bad solution, you need to define your goals better. What, exactly, are you trying to accomplish?

This is yet another simultaneous over complication and over simplification of something everyone who pays any attention already knows.

What about the political costs and feasibility of immigration in in developed countries? How exactly does Lant prescribe creating economic growth?

Furthermore, neither of these three alternatives are political substitutes, so their comparison doesn't seem particularly relevant.

Very happy to find this one. Seems like everyone who is bullish on redistribution could stand to benefit.

Why do they need to be limited to have kids? I think there are other ways to do this.

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