How important should the subject of poverty be within the discipline of economics? Some economists appear to think it is a very small issue compared to the magnificent mathematics of general equilibrium theory. Others believe that economics should fundamentally be about the sources of human well-being and misery, and that understanding poverty is absolutely fundamental for economics. How should we try to sort this out?
Many of us would agree with this. Dan Little goes further.
What this analysis leaves out is any consideration of the economic mechanisms that produce poverty within an affluent society, and how institutions could be adjusted so that poverty and inequality tended to fall over time as a consequence of the normal workings of economic institutions.
Consider these two graphs of income by percentile provided by Lane Kenworthy:
: Lane Kenworthy, Consider the Evidence blog (link))
He ends with
In the North Atlantic literature, structuralism’s intellectual foundations lie within a complex described by labels such as [original, neo-, post-]-[Keynesian, Kaleckian, Ricardian, Marxian] which nonmainstream economists have adopted; numerous variants exist in developing countries as well. The fundamental assumption of all these schools is that an economy’s institutions and distributional relationships across its productive sectors and social groups play essential roles in determining its macro behavior. (1)
This emphasis on study of the concrete institutions embodied in a given economy, and the distributive characteristics that these create, seems like a very good starting point for arriving at a better understanding of the economic foundations of poverty than we currently have.
The idea that institutional arrangements can make the difference seems weak because it leaves out the problem of how people will make an income, with what jobs, and what is the content of those jobs in skills, and to what extent is tech undermining those job possibilities. The question then really is what level of production and consumption are we aiming for, and what does it do to climate and job possibilities? Short of that discussion we are just treading water. I need to check through Little’s comprehensive site to see how he has explored these issues.Understanding Society.
I would even call it the economist’s fallacy: that changing interest rates, inflation, taxes, and other system parameteres subject to regulation, fed policy, is sufficient to titrate an economy at any time. Sure it works some of the time, but not when there are strong external factors. New technology, shifts in consumer desire, news.