More on Wealth and Poverty

A few days ago, I spilled a lot of electrons discussing the sources of wealth and poverty. This week, Arnold Kling has a great article applying many of the same concepts to give advice to Live8 and others who want to eliminate poverty.  While I droned on for about 30 inches of computer monitor space, Robert Lucas's quote in Kling's article gets to the heart of the issue in just a few lines:

"of the vast increase in the well-being of hundreds
of millions of people that has occurred in the 200-year course of the industrial
revolution to date, virtually none of it can be attributed to the direct
redistribution of resources from rich to poor. The potential for improving the
lives of poor people by finding different ways of distributing current
production is nothing compared to the apparently limitless potential of
increasing production."

He concludes with some advice for protestors:

1. The world is a complex place. The farther you are
removed from a situation, the less likely that your intervention there will do
good and the greater risk that it will cause harm. No matter how thoughtfully it
is administered, long-distance aid will tend to be
ineffective.

 

2. The easiest poverty to prevent is poverty that is
close by. By developing useful skills and remaining employed, you can help keep
yourself and your family out of poverty. That makes you less of a burden on the
world than if you fly half way around the world to stage
confrontations
.

 

3. Learn to distinguish motives from consequences. A
well-meaning policy can backfire. The seemingly cold-hearted impersonal market
is enormously beneficial.

 

4. Poverty is not a simple problem. See What Causes
Prosperity?

 

5. Remember that unlike the Folk Song Army of Tom
Lehrer's song, you have no monopoly on good intentions. A morality play in which
those who care crusade against those who are square makes for great theater.
However, it is not a realistic basis for economic policy.

 

As a parting shot, I noted previously the odd contradiction that is inherent in many G8 and similar protestors who purport to want to eliminate poverty:

In a nutshell, they want to fix poverty in the third world by
disavowing everything -- private property rights, individual
enterprise, free commerce, entrepreneurship, individual freedoms, etc.
-- that made the G8 not impoverished.  Rich nations, you have to help
the poor nations, but whatever you do, don't allow they to emulate what
you did to get rich. 

This is so nutty its unbelievable.  If they were camping outside of
the G8's door and saying that we want you to drop trade barriers on our
goods and help us foster entrepreneurship and we want your help
promoting private investment in our economy and infrastructure, I could
understand perfectly.  This is like activists camping outside of Jack
Welch's door looking for him to help the poor by funding programs to
teach children to drop out of school and avoid getting a jobs.

  • http://genericconfusion.blogspot.com Greg

    Excellent discussion, as usual.

  • speedbird

    Interesting site. Great sympathy for your near-right views. Feel you overstep the mark slightly: many on the (near) left support innovation and free-thinking, and in my personal experience of working for a living as a scientist, all businesses are obsessed with the concept of the revolutionary redistribution of wealth from poor to rich, and will only innovate when whipped soundly. But that's just my personal experience.

  • willy

    Poor countries don't need our "help" at all. The Congolese were quite happy before the Belgians invaded. They lived in their huts, had trading lines along their rivers, occasionally killed some of each other in small wars, like all civilized and uncivilized populaces crave to do.

    So let's leave them and their natural resources alone; they may need those, perhaps in 500 years, when they finally get bored with living in huts, and decide to start inventing "products"!