Look – a Republican reading a book about inequality? You all should be so proud of me.
Have you ever played that game where you’re trying to survive as a working poor person? The game keeps giving you terrible options but I’m so much of a stoic that I came out ok. It seemed like a bad exercise. I’m sure others would think I wouldn’t really be able to pass the game in real life.
According to The Broken Ladder by Keith Payne, the latter group may be wrong. The book covers how inequality completely changes the poor’s perspectives, focusing on the now, increasing risky behavior. Because I’m not one of the poor, I may be able to lift myself by my bootstraps but, if I had been born in poverty, I likely couldn’t.
I also thought the book was very interesting when it discussed how feeling poor can have the same effects as actually being poor. Because the mindset of the poor can be so devastating (as a live-for-today mindset leads to devastating consequences for finances, education, health), this can have poor effects for any part of the population – as anyone can “feel” poor even though only certain strata of the populations can actually claim poverty. Basically everyone loses.
And of course, Payne also discusses how both political parties have problematic stances on how to handle the poor in a high-inequality nation.
Conservatives focus on individual agency and argue that we have to develop incentives to motivate the underclass to improve their lot. But the poor are driven by a more immediate and critical set of incentives. Their lives involve daily crises, which they attempt to cope with using the best short-term crisis management responses they have available. They have long since abandoned conforming to he economist’s vision of rational responses to incentives and have replaced them with reactions aimed at keeping heads above water. Admonitions to start pulling up bootstraps ring hollow when you live in that world.
While partisans on the left recognize the importance of systemic factors like income inequality and inherited disadvantage, they too often minimize the role that individuals’ decisions play in their fates. They are correct in contending that individual outcomes are partly responses to the environment and social structures, but their abstract system-level explanations would be more persuasive to most people if they acknowledged that the system’s effects on any particular individual are reflected in the concrete choices he or she makes on a daily basis.
It may indeed be difficult if not impossible to pull someone out of a self-destructive cycle once he is firmly entrenched in it. But . . . people’s behaviors are responses to their environments, and those environments can be changed. . . The same forces that lead to vicious cycles among the poor also lead to virtuous cycles among the more affluent. If it seems obvious to you that it is better to sacrifice today for larger returns in the future, then you have probably been raised in an environment in which that kind of conscientious investment pays off. If you believe that most people can be trusted, you probably came of age in a world where most people were trustworthy. And if your stress response stabilizes once a stressful event is over, you are probably accustomed to being in a world that is essentially safe. If you have the good fortune to have these ares your default settings, then you are being lifted in an upward spiral. Your future is likely to be bright, because in the modern economy your instincts are productive ones, aimed at long-term success rather than immediate crisis management.
If you’re reading personal finance blogs, you probably grew up in an environment that was conducive to long-term thinking (or you are an amazing person for defying your upbringing). We are all so lucky to have been brought up in such an environment. What do you think we can do to help everyone grow up in a good environment?