Poverty: The Plus Side

Applicants for Admission to a Casual Ward by Luke Fildes, 1874.

“Poverty Should Have Risen”—so runs the cheery headline of a New York Times blog post this week by Casey B. Mulligan, professor of economics at the University of Chicago.

“Poverty did not rise between 2007 and 2011,” Mulligan writes, “and that shows why government policy is seriously off track.”

Yes, seriously off track. Perhaps you are under the popular impression that it is good when poverty does not go up. You might even think it a policy triumph. Not so. When job losses multiplied after the financial crash, Mulligan writes, poverty ought to have risen. That would have created job-seeking incentives. Destitution is want, to put it in Victorian terms. By keeping people out of poverty, “the government was helping too much,” writes Mulligan, so much so that it has been “erasing incentives.”

Could this message be more timely? This is a time of year, let’s admit it, when people gush with sentimentality. They write checks to charities. They make resolutions to cultivate more mercy, generosity, and forbearance. Their minds stray dangerously to the neglected poor. Why, the mood can be so redistributive that it borders on socialism!

But without poverty, remember, incentive structures would be skewed.

So many possibilities exist in this line of thought. Why stop at bemoaning low poverty rates? Can’t scholars at the University of Chicago economics department—heirs to Milton Friedman, the sort of people who post Adam Smith’s visage on their personal homepages—come up with other examples of the bracing jolt of market discipline? Let me suggest a few:

If there were more famine, people would develop a powerful incentive to eat.

If we stripped coats and hats off the indigent, the homeless would get off their duffs and find places to stay.

If we stop hugging our children, it would incentivize them to strive for love and recognition.

If we destroy half the hospitals, it will create powerful incentives for healthy living.

Put all these ideas together, and we just might decrease the surplus population!

Oh, and if we fired every economist whose dogma led to callousness, perhaps the discipline might once again try to imagine a humane and abundant economy, not an “incentivized” one.

A dose of unemployment—and poverty—might have a hugely clarifying effect on the economic mind.

Are not the workhouses full?