Examining the Poverty Trap

Hey everyone! It’s been a long day, but reading a section of Poor Economics was a great way to finish it off! Just read the next section titled “Trapped in Poverty?”

Here is today’s quote that caught my eye: “It is possible to make the world a better place — probably not tomorrow, but in some future that is within our reach—but we cannot get there with lazy thinking.”

This quote clicked me. Maybe if we give the poor support, we can help unlock a mind full of capabilities. But if we don’t, humanity could potentially lose a talented individual. 

But today’s reading further questioned me on what type of support is most effective. And finding the answer requires a complex, demanding process. 

A few days ago we explored a debate on whether aid is effective or not. Here comes another controversial economic question we must consider: Is it possible to get trapped in poverty? 

On one hand, we know some countries (because of geography or bad luck) are trapped in poverty. They are poor because they are poor. But through aid, they have the potential to become rich and get out of the poverty trap.

On the other hand, by contrast, some argue the condition of poverty isn’t permanent and therefore the “poverty trap” is a spurious idea. 

Do you believe in poverty traps?

To answer the question, we need to know that there are a few key factors that create poverty traps, and alleviating these problems could set the poor free and point them toward a virtuous cycle for increasing wealth. In order to design effective policy, it is crucial that we get answers to questions like when and where we should worry about poverty traps.

How would you define a “poor” person? Many might define it as someone without enough to eat. In fact, one common explanation for the cause of the poverty trap is the inability of the poor to feed themselves properly. The logic makes pretty sense here: The poor cannot afford to eat enough -> this makes them less productive -> keeps them poor. 

The nutrition-based poverty trap idea further explains this intuition:

We all need a certain number of calories to coexist, so when someone is very poor, the food provides barely enough energy for them to go through the motions of living and perhaps earn the income they originally used to buy that food. 

The S-Shaped Curve

I’ve always known the idea of income gaps and the increasing wealth disparity between the rich and the poor. The book offers a conducive answer: The very poor earn less than they need to be able to do significant work, but those who have enough to eat can do serious agricultural work. This creates a poverty trap, making the poor get poorer and the rich get richer. They eat better, get stronger and even richer, so that’s why the gap keeps increasing. The figure above, which appears in the book, displays an S-Shape curve, illustrating how the poor remain forever stuck in the poverty trap zone.

The hunger-based poverty trap definitely makes logical sense, but whether it remains relevant to the practices of poor people today is a question. 

Let’s leave it here today. See you tomorrow!