Why Do People Stay Poor? [pdf] • Hacker News Board

Re: Why Do People Stay Poor? [pdf]

#231

Post by frickinLasers » Thu, Jul 30, 2020, 2:38 AM UTC

SilasX wrote: post #197

frickinLasers wrote: post #190

Earlier quoted context omitted.

The OP implies no such thing.

Are we reading the same comment? >Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. That directly implies that if they could be lent the $15, they could get the long term cheaper option and save money, even if they had to pay it back plus a high APR.

Apparently we're not reading the same comment. In this example, the rich person pays cash for the 20-pack and probably earns interest on the savings. They have no need to pay interest on a loan. The poor person pays cash for the 2-pack and then pays again next month, and maybe takes out a payday loan to afford the rent after they have to call in sick, and there's your high APR. This is not a benefit. What am I misunderstanding?

Re: Why Do People Stay Poor? [pdf]

#232

Post by noch » Thu, Jul 30, 2020, 2:42 AM UTC

jasonwatkinspdx wrote: post #218

noch wrote: post #216

Earlier quoted context omitted.

The article you linked to is helpful but makes several important claims/conclusions that have been convincingly disproved/challenged in the time since 1996. For instance, it claims: > In fact IQ is a great example of a trait that is highly heritable but not genetically determined [...] However, "On the genetic architecture of intelligence and other quantitative traits" (Hsu, 2014, https://arxiv.org/abs/1408.3421 ) wh…

Hsu's research doesn't hold up under review. You're just doubling down on the exact same flawed reasoning. It's pretty clear where you're at and what argument you actually wanna make so I'm out.

> Hsu's research doesn't hold up under review.

I don't know what that statement means, but in good faith, I'll assume you can substantiate it. Instead, consider "Upward Intergenerational Mobility in the United States"(Mazumder, Pew Trust, 2012) https://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_a...

" Individuals, both black and white, with higher academic test scores are more likely to move up and out of the bottom quintile. Both black and white children born in the bottom quintile with median academic test scores are twice as likely to move up and out of the bottom quintile than if they had scores in the lowest percentile of the test score distribution. "

> It's pretty clear where you're at and what argument you actually wanna make [...]

I'm glad I was clear that we need a complete picture of the source of differential outcomes (that is, one that takes into account the tremendous amount that we know about human genetic evolution). A social welfare or wealth transfer system might have poor results depending on the correspondence between expectations and reality. It would be terrible, for instance, if wealth was transferred, yet recipients ended up eventually impoverished anyway.

fwiw My preference would be if more human effort was expended in developing therapies, protocols, medications that enhance general human intelligence. But as long as we can't discuss it openly, perhaps no progress will be made and wealth gaps will be exacerbated.

Re: Why Do People Stay Poor? [pdf]

#233

Post by Anon1096 » Thu, Jul 30, 2020, 2:49 AM UTC

CarbyAu wrote: post #221

redorb wrote: post #165

Earlier quoted context omitted.

This is a great definition of what I consider to be the 'poor tax'.. Not to mention if they ever get un-poor they don't have the knowledge to 'build wealth' until they start slowly learning it or from a mentor. We would better off teaching 'home finances, interest and banking' classes instead of Algebra 3 or geometry 2 (for 99% of people)

Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own…

Why should the interest rate on a savings account match inflation at all? I don't see the correlation. With FED rates so low, it isn't even evident that they should produce positive return, and I wouldn't be surprised to one day see negative return savings accounts.

Re: Why Do People Stay Poor? [pdf]

#234

Post by CarbyAu » Thu, Jul 30, 2020, 2:50 AM UTC

ip26 wrote: post #228

CarbyAu wrote: post #221

Earlier quoted context omitted.

Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own…

I'm not a finance guy but I suspect it's axiomatic that you can't keep up with inflation without taking any risk. Like a law of economics.

I will admit I have little financial management knowledge myself. I am inclined to agree with you, but what is the bank doing with the money you keep there?

Isn't the bank meant to be using your money in a "managed fund" like manner? IE leverage it to make profits.

Here in Australia the banks make quite decent profits, and yet a savings account can't break even, before tax?!?

I haven't done the sums but I am curious if it is better to own shares in the bank than put money in the bank.

I am also inclined to ensure my son does get financial knowledge. It is hard to play a game you know only limited rules of.

Re: Why Do People Stay Poor? [pdf]

#235

Post by Anon1096 » Thu, Jul 30, 2020, 2:56 AM UTC

petra wrote: post #173

SilasX wrote: post #166

Earlier quoted context omitted.

If so, turn it into a perpetually profitable self-funding charity that fronts the poor the money to get the cheaper option in return for a cut of the savings. It's probably not possible because there are factors other than what you described.

In Israel in the 60-80's the state created "rent to own" housing projects for poor people. It worked pretty well.

Paying a mortgage isn't much different than a rent to own scheme.

Re: Why Do People Stay Poor? [pdf]

#236

Post by SilasX » Thu, Jul 30, 2020, 2:56 AM UTC

frickinLasers wrote: post #231

SilasX wrote: post #197

Earlier quoted context omitted.

Are we reading the same comment? >Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. That directly implies that if they could be lent the $15, they could get the long term cheaper option and save money, even if they had to pay it back plus a high APR.

Apparently we're not reading the same comment. In this example, the rich person pays cash for the 20-pack and probably earns interest on the savings. They have no need to pay interest on a loan. The poor person pays cash for the 2-pack and then pays again next month, and maybe takes out a payday loan to afford the rent after they have to call in sick, and there's your high APR. This is not a benefit. What am I misund…

The entire premise, where I suggested this was an easy mutually beneficial profit opportunity, for the rich person to lend to the poor person to make the bulk purchases? I'm not sure you're keeping up with the exchange here.

Re: Why Do People Stay Poor? [pdf]

#237

Post by CarbyAu » Thu, Jul 30, 2020, 3:07 AM UTC

Anon1096 wrote: post #233

CarbyAu wrote: post #221

Earlier quoted context omitted.

Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own…

Why should the interest rate on a savings account match inflation at all? I don't see the correlation. With FED rates so low, it isn't even evident that they should produce positive return, and I wouldn't be surprised to one day see negative return savings accounts.

While I have a vague intuition from an economic point of view you are correct,(I am not a finance guy) I take issue with the name of the product.

Savings. Generally advertised as helping your money grow. It isn't advertised as a "Slow draining of value" account.

Re: Why Do People Stay Poor? [pdf]

#238

Post by schrodinger » Thu, Jul 30, 2020, 3:11 AM UTC

ip26 wrote: post #228

CarbyAu wrote: post #221

Earlier quoted context omitted.

Agreed. It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value. Many people are not capable of more financial management capability. The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up. Ultimately, poor people don't own…

I'm not a finance guy but I suspect it's axiomatic that you can't keep up with inflation without taking any risk. Like a law of economics.

Isn't a government bond basically equivalent to inflation? That would mean you have a risk-free way to get "inflation" returns, with the caveat that you can't access the money for a period of time. Although I guess you can argue that "tying up" the money is a form a risk, and almost certainly a luxury some poor people cannot afford.

Re: Why Do People Stay Poor? [pdf]

#239

Post by JamesBarney » Thu, Jul 30, 2020, 3:17 AM UTC

DubiousPusher wrote: post #141

ghufran_syed wrote: post #121

I’m not qualified to judge the technical merits of the paper, but their conclusion seems plausible. They concluded that in an illiterate rural population, there did seem to be a threshold effect in asset levels above which it seemed much easier to progress economically. But it’s unclear to me how applicable this is to the poor in the US or other developed economies, particularly when we’re talking about a population…

Maybe it's just me but this seems like a fairly pedantic point. I guess if you're not familiar at all with issues of domestic and international poverty you might make the mistake of comparing these numbers but I've never had a real conversation with someone who confused the two. I grew up well below the poverty line in the USA and it was pretty self evident that I was not leading the same kind of lifestyle as someone…

I think a question many of us in this thread are asking ourselves is, would this work in the U.S. and the OP made a comment relevant to this point.

Re: Why Do People Stay Poor? [pdf]

#240

Post by JamesBarney » Thu, Jul 30, 2020, 3:20 AM UTC

roenxi wrote: post #6

I'm not going to comment about the article without reading it carefully; but just in case there are any aspiring data analysts online there is a chart that is interesting even without knowing anything about the data... On page 64 (65 as the PDF numbers it), chart (b) "Distribution of savings rate" has an awkward little peak on the left hand side of the chart. It is very difficult to tell from inspection whether that…

I think that's a real effect.

Intuitively I would imagine a lot more people save 0% (or close to 0%) of their income than save 50% of their income, I would also expect a lot more people to save or overspend 3% of their income than overspend or save 25% of their income.