A few weeks ago, Professor Seema Jayachandran from Northwestern University published an article in the New York Times in which she discussed the role of positive thinking and of believing in oneself for overcoming poverty. Jayachandran argues that there is “growing evidence that it can used as an anti-poverty strategy”, while also warning about placing too much emphasis on positive thinking alone. This post will dwell on the latter point, arguing that we should pay much more attention to limitations and broader contexts of positive thinking in development. I do not want to deny the role of self-worth and forward-looking aspirations for poverty reduction and quality of life more generally, but I will emphasize the importance of considering their role only as part of a broader policy mix.
Instilling Hope through Movies: How Can It Reduce Poverty and What Are the Risks?
Jayachandran reports three experiments seeking to increase the self-worth and forward-looking aspirations of poor people in some detail and mentions a number of other studies going in similar directions. One study, for example, was conducted with students in Uganda who watched the movie “Queen of Katwe”. In this inspirational movie, an underprivileged girl from Kampala becomes a chess prodigy, which then enables her to improve her living conditions and those of her family. The study finds that exposure to this movie could raise the students’ educational aspirations and motivation in national exams. Another experiment, conducted in Mexico, exposed indigenous women with access to microfinance to a so-called hope intervention. This intervention consisted in a movie as well, this time featuring a documentary about women from Mexican indigenous backgrounds who had used microfinance loans successfully. In the four subsequent weeks, they furthermore participated in a so-called hope curriculum, in which they set goals for themselves and envisioned how obtaining these goals would make their lives go better. This intervention raised the women’s aspirations and hopes for the future.
These seems like remarkable successes and should of course be welcomed. “That a brief exposure to an inspirational story transformed even a few people’s lives in a measurable way strikes me as remarkable”, Jayachandran writes. At the same time, she concedes that “hope isn’t a cure-all (…, a)nd instilling hope without skills or financial resources is unlikely to be enough to lift people out of poverty.” She also mentions that lifting people’s aspirations to such an extent that hopes and expectations become unrealistic can potentially be harmful. These points cannot be emphasized enough, as it seems that the reception of such studies is often overly optimistic and even naïve. For example, the World Development Report 2015 evaluates another experiment aimed at influencing presumably fatalistic aspirations of poor Ethiopians. Without mentioning potential downsides, the report states that “the study illustrates the ability of an intervention to change a mental model – one’s belief in what is possible in the future” (p. 4). The intervention consisted in a one-day treatment involving watching an inspirational movie as well. All the potential reasons not to expect too much and also to be cautious about the overall effects of such an intervention briefly mentioned by Jayachandran – such as links with structural and non-psychological barriers to overcoming poverty, or the risk of raising unrealistic aspirations – all too often go unnoticed. As a consequence, there is a considerable risk of overestimating the positive effects of such interventions, and to overlook some potential downsides (as also discussed in one of my previous posts on this blog).
To me, the essence of this risk is this: if we emphasize the importance of individual beliefs and aspirations too much, we easily lose sight of other, structural determinants of poverty. Individuals are not poor just because they lack self-esteem or forward-looking aspirations. A lack of self-esteem or forward-looking aspirations may be one correlate and consequence of poverty, and may contribute to making the fight against poverty even harder. But they are rarely the only – and probably not the primary – cause of persisting poverty. As important as it is to think about their roles, thinking or suggesting that positive thinking alone can reduce poverty at a significant scale would be misguided: poverty is primarily a societal and structural problem, not an individual one. While a positive outlook on life or increased self-worth have intrinsic value, with regards to their potential effects on achievements and biographies, it is crucial to think about them in a broader context – for several reasons.
The Importance of Situating Hope and Aspirations in the Broader Context
First, the potential of only lifting aspirations is rather low when people live in poverty. Consider that different people have different opportunity sets (the paper version of this argument is here). The objective opportunity set consists of objectively available opportunities and is limited by hard barriers to their chances, e.g. the lack of economic and financial resources or exclusion due to discrimination. A life in poverty means that people have considerably limited opportunity sets, and this is usually not something they can change by positive thinking, let alone in the short run. Positive thinking is relevant only when we talk about subjective opportunity sets. A subjective opportunity set includes all those opportunities from the objective set that a person effectively considers for herself. If the subjective opportunity set is only a limited subset of the objective one, there exist some opportunities this person does not consider for herself (this has been characterized as an aspiration trap). This could occur, for example, due to a lack of self-esteem, optimism, anticipated discrimination or a bunch of other psychological and cognitive factors. It could be the case, for example, that a student from a poor background has the potential and abilities to enter university, but does not see herself in this unknown environment because of a lack of role models or of social prejudice. If a behavioral intervention challenges these views, this may result in an expanded subjective opportunity set. The interventions and their effects described by Jayachandran are likely of this nature. However, hope and aspirations cannot – at least not immediately – help expand objective opportunity sets. To increase these, a mix with other social and economic policies is required. And these would have to tackle not only material aspects, but also the mindsets of society at large, e.g. in order to fight discriminatory practices.
Second, emphasizing the beneficial effects of hope and aspirations alone can shape political discourses in detrimental ways. If the poor are apparently responsible for being poor because they are unmotivated, depressed, fatalistic or hopeless, material poverty does not seem to be at the core of the issue, and thus social and economic policies aimed at reducing poverty do not seem to be a necessary priority. Giving some people a chance to blame the poor for being poor would be very unfortunate and misguided. To be sure, this is not what Jayachandran does: in her words, psychological interventions are “unlikely to be enough to lift people out of poverty”. Yet I think that this message could be much bolder in order to not give certain interest groups a chance to interpret the policy implications of the above-mentioned studies in misguided ways. This issue is an illustration, by the way, of problems that arise when policy design is apparently a logical consequence of evidence, as pointed out by Jean Drèze last week: policy design requires serious reflections about understanding, values and objectives, and announcing that positive thinking can reduce poverty and presenting corresponding evidence without reflection about broader contexts and implications can lead to policy-making that is unlikely to benefit the poor.
Third, talking about values and objectives of policy, we should think a bit about the specific aims of such behavioural interventions. One aspect is the time horizon: how long can the inspirational effect of watching a movie last? After poor students managed to enter public university, there will certainly be many more hindrances and challenges in their way, linked to their backgrounds. Unfortunately, little is known so far about the medium- and long-term consequences of such interventions. In the spirit of these papers, we should pay more attention to potentially detrimental effects of raising aspirations that only motivate in the short-term but lead to frustration afterwards. For example, in the case of the so-called Chilean dream, there was a period in the 2000s when Chilean families were quite optimistic about educational returns and invested a lot into the education of their children. When it turned out that the returns were different than expected, this resulted in considerable frustration. Rather than focusing on lifting up aspirations at one specific moment (even though it is understandable that researchers look out for easy-to-measure short-term effects), aiming at supporting underprivileged people in developing political agency could have more beneficial medium- and long-term benefits. For example, this paper by Ina Conradie and Ingrid Robeyns analyses a development program in a Cape Town township, where women gathered over a period of time to reflect upon their aspirations and life goals and to support each other in reaching these. Reflections and joint discussions upon possibilities, capacities, and limitations helped the women to articulate aspirations that could improve their well-being, and to reconsider the boundaries of their opportunities. The goal of this program was not so much to raise the women’s aspirations per se, but to incite reflection upon these and to develop individual and collective agency with regards also to rather medium- and long-term aspirations and actions. In a sense, such an approach is less immediate and more political than simply raising hopes for the future.
Svenja Flechtner is Assistant Professor at the University of Siegen, Germany. @SvenjaFl.
Developing Economics 
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To eliminate poverty–its easy when you know how! trouble is that few do and most don’t want to know!
The cause of poverty is lack of equality of opportunity to the natural resources, particularly the land.Not all land has equal value but the right to having equal shares in the variegated opportunities that it offers is paramount. When the land is very productive and central to a city it has high value, but when it is owned by only a few people compared to its productive power, it is no wonder that they will benefit greatly and out of all proportion to the areas involved.
The way that a government can cause and encourage richer people to better share their land rights is to tax land values. The most potentially productive land owners will consequently pay the most and find themselves needing to make proper use of their sites. Poorer people who have some less central land will also feel the need to use it well and the dirt-poor farmers on the outside will probably be able to sell their produce without having to be taxed at all.
The principles of all this were explained by Henry George 130 years ago in his classic book “Progress and Poverty” which sold 3 million copies and is still in print. It is long past the time when the government should allow wealthy land owners the rights to the most productive sites whilst poor farmers cannot manage even to scrape by an existence.
TAX LAND NOT LABOR; TAX TAKINGS NOT MAKINGS!
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[…] Beitrag ist zuerst in englischer Sprache beim Developing Economics-Blog […]
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The Most Socially Just Tax
Our present complicated system for taxation is unfair and has many faults. The biggest problem is to arrange it on a socially just basis. Many companies employ their workers in various ways and pay them diversely. Since these companies are registered in different countries for a number of categories, the determination the general criterion for a just tax system becomes impossible, particularly if it is to be based on a fair measure of human work-activity. So why try to do this when there is a better means available, which is really a true and socially just method?
Adam Smith’s (“Wealth of Nations”, REF. 1) says that land is one of the 3 factors of production (the other 2 being labor and durable capital goods). The usefulness of a particular site of land is expressed by its purchase price and in the amounts that tenants willingly pay as rent, for its access rights. Land is often considered as being a form of capital, since it is traded similarly to other durable capital goods items. However it is not actually man-made, so rightly it does not fall within this category. Indeed, the land was originally a gift of nature (if not of God), for which all the people in the region should have equal rights for sharing in its opportunities for residence, accessibility and use.
However over many years, as communities became established and grew, the land has been traded as if it was an item of durable goods and today it is often treated as a form of capital investment. It is apparent that for a particular site, its current site-value greatly depends on location and is related to the community density in its region, as well as the size and natural resources that it can provide. Such bounty, often manifest in the exploitation of rivers, minerals, animals or plants of specific beauty and use are available only after infrastructural developments have made possible access to the particular place. Consequently, much of the land value is created by man within his society, by his need and ability to reach it and take from it materials, plants and live creatures, as well as the opportunities it provides for working space near to people. These advantages should logically and ethically be fairly returned to the community, for its general use within the government, as explained by Martin Adams (in “LAND” REF 2.).
However, due to our existing laws, the land is owned and formally registered and its value is traded, even though it can’t be moved to another place, like other kinds of capital goods. This right of ownership gives the landlord two big advantages over the rest of the community. He/she can determine how it may be used, or if it is to be held out of use for speculative reasons, until the city grows and the site becomes more valuable. Secondly the land owner enjoys the rent from a tenant or its equivalent if he uses the land himself. Speculation in land values and its rental earnings are encouraged by the law, in treating a site of land as personal or private property—as if it were an item of capital goods, although it is not, see Prof. Mason Gaffney and Fred Harrison: “The Corruption of Economics”, REF. 3.
Regarding taxation and local community spending, the municipal taxes we pay are partly used for improving the infrastructure. This means that the land becomes more useful and valuable without the landlord doing anything—he/she will always benefit from our present tax regime from which the land value grows. This also applies when the status of unused municipal land is upgraded and it becomes fit for community development. When this news is leaked, after landlords and banks corruptly pay for this valuable information, speculation in land values is rife.
There are many advantages if the land values were taxed instead of the many different kinds of production-based activities such as earnings, purchases, capital gains, home and foreign company investments, etc., (with all their regulations, complications and loop-holes). The only people due to lose from this are those who exploit the growing values of the land over the past years, when “mere” land ownership confers a financial benefit, without the owner doing a scrap of work. Consequently, for a truly socially just kind of taxation to apply there can only be one method–Land-Value Taxation.
Consider how land becomes valuable. Pioneers and new settlers in a region begin to specialize and this slowly improves their efficiency in producing specific goods. The land central to the new colony is the most valuable, due to its easy availability and least transport needed. After an initial start, this distribution in land values is created by the community. It is not due only to the natural land resources. As the city expands, speculators in land values will deliberately hold potentially useful sites out of use, until planning and development have permitted their more intensive use and for their values to grow. Meanwhile there is fierce competition for access to the most suitable sites for housing, agriculture, manufacturing industries, transport byways, etc. The limited availability of the most useful land means that the high rents paid by tenants make their residence more costly and the provision of goods and services more expensive.
Entrepreneurs find it difficult or impossible to compete with the big organizations who have already taken full advantage of their more central sites. The greater cost of access, or the greater expense in transportation from less costly outlaying regions, discourages these later arrivals. It also creates unemployment, causing wages to be lowered by the land monopolists, who control the big producing organizations, and whose land was previously obtained when it was relatively cheap. Consequently this basic structure of our current macroeconomics system, works to limit opportunity and to create poverty, see above reference.
The most basic cause of our continuing poverty is the lack of properly paid work and the reason for this is the lack of opportunity of access to the land on which the work must be done. The useful land is monopolized by a landlord who either holds it out of use (for speculation in its rising value), or charges the tenant heavily for its right of access. In the case when the landlord is also the producer, he/she has a monopolistic control of the land and of the produce too, and can charge more for this access right than what an entrepreneur, who seeks greater opportunity, normally would be able to afford.
A wise and sensible government would recognize that this problem of poverty derives from lack of the opportunities to work and earn. It can be solved by the use of a tax system which encourages the proper use of land and which stops penalizing everything and everybody else. Such a tax system was proposed about 140 years ago by Henry George, a (North) American economist, but somehow most macro-economists seem never to have heard of him, in common with a whole lot of other experts. (I would guess that they even don’t want to know, which is even worse!) In “Progress and Poverty”, REF. 4, Henry George proposed a single tax on land values without other kinds of tax on earnings, sales of produce, services, capital-gains etc. This regime of land value tax (LVT) has 17 features which benefit almost everyone in the economy, except for landlords, tax collectors and banks, who/which do nothing productive and find that land dominance and its capitalistic exploitation have their own (unjust) rewards.
17 Aspects of LVT Affecting Government, Land Owners, Communities and Ethics
Four Advantages for Government:
1. LVT, adds to the national income as do other taxation systems, but it should replace them. The author has shown in REF.5, that taxation of any kind is beneficial to the country as a whole due to its national income providing for more work too, but that when the tax applies to land the topology and spread of its effects are about 3 times as beneficial as when the same amounts of income are taken directly from labor.
2. The cost of collecting the LVT is less than for all of the production-related taxes–tax avoidance becomes impossible, because the sites are visible to all and who owns each site is public knowledge. The army of tax collectors who are opposing a similar set of lawyers, are no longer busy with tax loop-holes in the law, so the number of people more productively employed will grow and the penalty on the country of having complicated taxation is less.
3. Consumers pay less for their purchases due to lower production costs (see below). They can buy more goods and enjoy a raised standard of living. This creates greater satisfaction with the management of national affairs and more prosperity.
4. The national economy stabilizes—it no longer experiences the 18 year business boom/bust cycle, due to periodic speculation in land values (see below). The withholding of unused land is eliminated see item 7, so there is less need for the complications of frequent land sales, with developers searching and buyers hunting for unused sites.
Six Aspects Affecting Land Owners:
5. LVT is progressive—this tax depends on the site area as well as its position. The owners of the most potentially productive sites pay the most tax per unit of area. Urban sites provide the most usefulness and their owners will pay at greater rates, whilst big rural sites have less value and can be farmed appropriately, to meet their ability to provide useful produce. Small-holder farming closer to population centers becomes more practical, due to local markets and reduced distribution costs.
6. The land owner pays his LVT regardless of how his site is used. A large proportion of the present ground-rent from the tenants (who do use the land properly), becomes transformed into the LVT, with the result that the land has less sales-value but retains a significant “rental” value.
7. LVT stops speculation in land prices, because the withholding of land from its proper use is not worthwhile.
8. The introduction of LVT initially reduces the sales price of sites, even though their rental value can grow over a longer term. As more sites become available, the competition for them is less fierce and entrepreneurs have more of a chance to get started.
9. With LVT, land owners are unable to pass the tax on to their tenants as rent hikes, due to the reduced competition for access to the additional sites that come into use.
10. Speculators in land values will want to foreclose on their mortgages and withdraw their money for reinvestment. Therefore LVT should be introduced gradually, to allow these speculators sufficient time to transfer their money to company-based shares etc., and simultaneously to meet the increased demand for produce (see below, items 12 and 13).
Three Aspects Regarding Communities:
11. With LVT, there is an incentive to use land for production, transport or residence, rather than it being vacant and held unused.
12. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper too, because entrepreneurs have less difficulty in starting-up their businesses, and because they pay less ground-rent–consequently demand grows, whilst unemployment and poverty decrease.
13. Investment money is withdrawn from land and placed in durable capital goods. This means more advances in technology and cheaper goods too because the effectiveness of labor has been raised.
Four Aspects About Ethics:
14. The collection of taxes from productive effort and commerce is socially unjust. LVT replaces this national extortion by gathering the surplus rental income, which comes without any exertion from the land owner or by the banks–LVT is a natural system of national income-gathering.
15. Previous bribery and corruption for gaining privileged information about land, cease. Before, this was due to the leaking of news of municipal plans for housing and industrial development, causing shock-waves in local land prices (and municipal workers’ and lawyers’ bank accounts!)
16. The improved use of the more central land of cities reduces the environmental damage due to unused sites being dumping-grounds, and the smaller amount of fossil-fuel use (with its air-pollution), when traveling between home and workplace.
17. Because the LVT eliminates the advantage that landlords currently hold over our society, LVT provides a greater equality of opportunity to earn a living. Entrepreneurs can operate in a natural way– to provide more jobs because their production costs are reduced. Then untaxed earnings will correspond more closely to the value that the labor puts into the product or service. Consequently, after LVT has been properly and fully introduced as a single tax, it will eliminate poverty and improve business ethics.
References:
1. Adam Smith, 1776: “The Wealth of Nations”, UK
2. Martin Adams, 2015: “LAND– A New Paradigm for a Thriving World”, North Atlantic Books, California, USA
3. Mason Gaffney and Fred Harrison, 2005: “The Corruption of Economics”, Shepheard-Walwyn, London, UK
4. Henry George: “Progress and Poverty” 1897, reprinted 1978 by the Schalkenbach Foundation, New York, USA
5. David Harold Chester, 2015: “Consequential Macroeconomics—Rationalizing About How Our Social System Works”, Lambert Academic Publishing, Saarbüchen, Germany
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