Friday, February 10, 2006

How to make life as easy as possible for those near the bottom

From a comment on a FLOW group (to join one of our groups,

"I suggest that this means that we should look for
ways to make life as easy as possible for those at or
near the bottom, in the public policy realm."

I agree emphatically. It is easy to talk about the
idealistic consequences of raising four billion poor
in the developing world to our standard of living, but
a direct result of that is likely to be stiffer
competition for those already near the bottom of our
income distribution. It is an unambigous gain in
justice and human well-being for a Mexican making
$3.65 per day in Mexico to enter the U.S. and make $68
per day (the respective average daily salaries for
agricultural laborers), but such dramatic gains don't
help poor Americans.

During this long period of globalization, during which
downward pressure on wages for people with poor
initiative, problem-solving, and reliability skills
will become overwhelming, allowing the market to
decrease costs so that everyone can afford a decent
standard of living is the best path. Wal-mart is an
exemplary hero here; as a previous article points out,
Wal-mart may be saving poor people $265 billion per

Housing costs have increased 72% since 1970. There
are excellent recent studies showing that at least
40%, and probably much more (much of the remainder
comes from "increase in quality" some of which may be
mandated by regulation, and there is evidence that
actual construction costs have decreased), of the
increase in housing costs since 1970 are due to
increased regulation. Worse yet, in a highly
regulated environment, the process of initiating
cost-effective innovations that don't meet existing
regulatory structures won't even be considered. In
the absence of such regulations, I suspect that a
Wal-mart of housing could now be producing housing
units that were 50% (or more) cheaper than in 1970
instead of 72% more.

Housing costs take up 30-60% or more of the household
budgets for poor people (usually a higher percentage
the poorer one is). If someone were to propose a 50%
mandated increase in salaries for the poor,
progressives would celebrate. Yet a deregulated
housing market that allowed entrepreneurs to create
lower cost (and higher quality) housing solutions
could result in household budgets for the poor that
are, in effect, 50% higher.

The mandated increase in salaries is a lot more
compelling emotionally, especially if it involves
taking money away from corporations or the rich to
give to the poor. But there are numerous serious
problems with allowing ourselves such emotional
satisfactions, including destroying the job market for
poor people, accelerating the rate at which
investment dollars move to other places or replace
human labor by technology, creating bloated,
inefficient, and corrupt bureaucracies, and creating
an additional source of animosity towards immigrants
(I think of welfare states as the moral equivalent of
gated communities because they exacerbate a "keep them
out of here so they don't take our stuff" attitude).

Thus a major initiative that FLOW must take on is to
train people that giving in to their self-righteous
Robin Hood instincts is not especially beneficial,
whereas supporting various types of deregulation could
be profoundly helpful. Everything said about housing
applies also to education and health care; I know
that, over time (a decade or so to get it going
smoothly) I could create education that is roughly ten
times as effective as government education, most
especially for poor people, at half the cost.
Government managed schools, together with occupational
licensure, are the greatest obstacles to social
mobility in America today.

For citations see "Empowering the Marginialized" at