An Anti-Poverty Strategy

Richard Reeves has a post at Brookings about the "two anti-poverty strategies." He explains:

Strategy 1 policies attempt to reduce the number of people in income poverty, usually by transferring income directly. Strategy 2 policies try to blunt the impact of income poverty on overall quality of life.

Insofar as Reeves' post ultimately just ends up being about income institutions versus in-kind benefit institutions, it is tame and unremarkable. I take exception however with the way he describes these two strategies, which I think is wrong in important ways.

Governments distribute the national income through the creation of laws and institutions. There is an infinite variety of institutional sets to choose from, but for our purposes here imagine the government has two institutional sets sitting in front of it on a hypothetical table.

In the red box, there lies egalitarian institutions that distribute the national income fairly evenly (certainly more evenly than the blue box), making the risk of poverty very low. In the blue box, there lies inegalitarian institutions that distribute the national income very unevenly, making the risk of poverty quite high.

Insofar as the government must put in place institutions, it has to decide whether to go with the red box or the blue box. That is, it must decide: do I want low-poverty institutions or high-poverty institutions?

Reeves' Strategy 1 is sort of like the red box, but not quite. You see, the red box is not really about reducing poverty, but instead about not creating it in the first place. There are no poor people prior to the distribution of income, and there is no distribution of income prior to the selection of institutions. In short, the red box strategy says, "hey how about we don't make a lot of people poor by picking high-poverty institutions?"

Reeves' Strategy 2 is the blue box combined with half-measures designed to mitigate some of the severe suffering and disadvantages that predictably results from inegalitarian institutions. The blue box strategy says "let's create a bunch of poor people by selecting high-poverty institutions and then also maybe mop up a portion of the human disaster that such a decision creates." It's not so much a strategy for helping the poor as it is a strategy for creating the poor and then doing some things that make us feel a little better about it.

The problem with the thinking of people like Reeves (and he is the norm on this) is that it skips over crucial questions that are analytically prior to the ones he is addressing. Before anything else, we have to ask ourselves whether we want to select egalitarian institutions or inegalitarian institutions. That debate must come first because it is the resolution of that debate that determines how many poor people there are even going to be.

For me, the red box is the obvious choice because I think poverty is quite bad and as such we shouldn't create it because creating bad things is bad. There are certainly people who don't think poverty is bad or who think that the advantages of the blue box outweigh the bad of creating poverty. I don't know if that describes Reeves or not, but if so, he should say so.