21st century economics just starting

Mark Thoma carried a post on a piece The sting of poverty, by Drake Bennett, Boston Globe on a fresher look at the reasons poor people are ‘irrational’ in neo-liberal economic terms regarding diminishing returns of marginal utility.

Many familiar names are in the comments. It is a great start to bringing economic theory out of the limits of a mechanistic approach that purports to explain human behavior but includes little of any other science in explanation.

While the article looks at some kinds of decision making for the poor, I also will have other works and ideas about ‘fair’, ‘wealthy’, ‘rich’, and ‘value’, ‘responsibility’. I do know our pithy sayings just don’t describe much. So it is well worth going over.

That can be the first admission of some kinds of ignorance, and a chance to take another look into the more real world of humans and their apparent messiness.


[Charles] Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn’t apply to the poor.
When we’re poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where … bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The … poorer one is … the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.
Poverty and wealth, by this logic, don’t just fall along a continuum… They are instead fundamentally different experiences… At some point between the two, people stop thinking in terms of goods and start thinking in terms of problems, and that shift has enormous consequences. …