How to Alleviate Poverty

James Taranto discusses research on ‘pathological altruism’ in which attempts to promote the welfare of others instead result in unanticipated harm. The difference between good and bad altruism is contained in the following example

if you offer to help a friend move, then accidentally break an expensive item, your altruism probably isn’t pathological; whereas if your brother is addicted to painkillers and you help him obtain them, it is.

Currently we spend nearly $1T a year to help the poor, and the poor seem, if anything, worse than 1965 in terms of their relative lack of purpose and weaker social connections. The poor are in the best position to help the poor, and so encouraging greater prudence, thrift, sobriety, respect, empathy, discipline, and other virtues would be far better than telling them a comforting story about how their fate is due to clannish outsiders.

For example, famed philosopher Peter Singer promotes the idea that is basically one of radical utilitarianism: in his view the most effective form of altruism would be to save only about $20k/year for oneself, and then give the rest to charities that would reduce the death rate from poverty-related diseases and malnutrition.  He basically thinks there’s no difference between walking by a bleeding infant, and not giving money to these charities, because in both cases you can save a life with very little effort.

I’m skeptical that’s ‘effective altruism’ as he claims, in that with bleeding infants I’m 99% sure I can staunch a wound and then get the kid to a hospital.  As for giving money to charities, that’s been going on for decades, and I don’t think the four tigers, West Germany or China, was turned around via charity, while perennial charity-cases in Africa haven’t shown improvement, just more poor people (eg, we have 85 million in Ethiopia now vs. 40 million in the 1985 famine that was supposedly due to ‘overpopulation’).  Like the famous trolley problem, I think the flaw in Singer’s thinking is to assume a probability based on a theory is 100%, when in fact, these indirect effects are usually quite improbable.

Here’s a solution that would be much more effective: poor people should only have children if they can afford to raise them to adulthood.  The power is in the hands of those we normally see as the victims, they are most able to help shrink the next generation of poverty. How does one do this? By not having means-based charity!  You encourage what you subsidize.

You might say, the poor have a right to have children. Fine, but does it follow I have an obligation to support their children? You might say I do, but I would say perhaps, but it isn’t sustainable.  F.A. Hayek himself noted that the ability for international agencies to supply entire populations with food to feed what they cannot creates an unsustainable situation that will surely end poorly (he was thinking about Egypt).

About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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