Friday, September 29, 2006

The Causes of Poverty?

DON BOUDREAUX POINTS OUT that asking what causes poverty puts things backwards:
". . . . But writing after the fruits of the wealth explosion began raining down widely, even as astute a mind as Marshall missed the fact that poverty has no causes. Poverty is humankind’s default mode. It’s what exists if we do nothing. “Creating” poverty -- causing poverty -- is no challenge whatsoever.

Escaping poverty has causes – that is, wealth has causes.

This point bears repeating. Poverty has no causes. Wealth has causes.

But capitalism has been so enormously successful at producing widespread material abundance that we today -- like Alfred Marshall in 1890 -- regard wealth as innate to our existence, as our default mode. It is not. The set of institutions that will promote the creation of widespread prosperity is minuscule in number compared to those that prevent people from creating material prosperity. "
I had not thought in terms of the "default" position before. This seems tremendously important to take note off. A world characterized by "poverty" as we think of this term today really is the default position, or it really can be thought of as the starting point. It is the creation of wealth that means people can escape from poverty. People will make the choices that create wealth if government acts to enforce private property rights and contracts, and further if government avoids supporting predatory activities, people will prosper all that much more.

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