Perverse incentives?

Posted: 12 December 2012 in Uncategorized
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As the number of people who fall below the poverty line continues to increase, the attempts to blame the poor (and government programs to help the poor) also grow.

First, it was the rediscovery of the “culture of poverty.” Then, it was the “pathological behavior” of the poor. Now, the focus appears to have shifted to the “perverse incentives” of welfare programs.

Let me suggest two simple alternatives. First, create decent, high-paying jobs for all workers. Then, benefit cut-offs would actually encourage able-bodied people to take those jobs. And, for the rest, who simply can’t work, welfare programs should provide a decent standard of living.

Second, and perhaps more important, stop worrying about the perverse incentives facing poor people and focus on the real problem: the perverse incentives that have been created for rich people. They’re the ones who gain when workers are laid off or their jobs are shipped overseas or their homes are foreclosed. They’re the ones who have every incentive to keep their taxes low and to run corporations and banks like their own piggy banks. The way the rules are currently structured, those who are on top receive bonuses, which they park in offshore accounts, precisely when they make the decisions that drive workers into poverty in the first place.

Those are the real perverse incentives we should be worried about.

  1. […] often argued on this blog that (e.g., here and here), instead of studying the so-called culture of poverty, we should focus instead on the pathologies […]

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