Yah Acemoglu! I hadn’t seen that stuff cheers!

Indeed, that is the criticism – but I was aiming it as more of a “extra point for people who may not have considered it when discussing redistribution” rather than anything too harsh!

I’ve just had “that conversation” a lot recently, and thought I should blog the fact that it is important to be a little careful 🙂

Thanks for the clarification. So the criticism is that we should consider general equilibrium effects for scaled-up projects, and not just partial equilibrium? I think you’re in very good company here – http://chrisblattman.com/2010/05/07/whats-the-alternative-to-randomized-control-trials-in-development-research/
and
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.24.3.17

Indeedy – one of the key reasons I wrote “may” was with that directly in mind. Furthermore, I think I would prefer a situation where we transfer money incomes rather than trying to “pick” goods and services – so in that regard I think I misspoke in comments 😉

But let me discuss it in any case. One thing to keep in mind is that even with those schemes, the impact is expected to change as programmes are scaled up. Again if we are simply looking at a shift in money incomes from the very wealthiest group to the very poorest over a global economy there will be a shift in prices that does not occur with small targeted transfers. As a result, this does not suggest that the impact on poverty will just “scale up” either.

This is most certainly not to suggest that it is the wrong way – if we could solve institutional problems, then money transfers likely offer the best way forward, as it does not presuppose the goods and services that the poorest desire to push them out of “poverty” as they would define it subjectively.

The key reason I think I wrote that line is because, in my mind, I was
thinking about “the ability to buy a certain minimum level of goods and
services” as the key thing, rather than having money income at
pre-transfer prices – so I was thinking of it in terms of providing the
capability to reach a certain minimum level of consumption. When I read
it now it seems like I am saying “intervene in specific markets” –
which is indeed a touch strange for me to say!

My key point in all of this is simply to point out that prices would change, and as a result those types of comments that are fairly common in public (if so and so gave up their income we’d feed XXX people) are a touch off base – even if they are well intentioned!

Fair post, but to challenge you on this: “On a global scale, it may be better to focus directly on providing access to goods and services that the poor require, rather than
arbitrary measures of money incomes.”

I’m pretty sure conventional wisdom is that providing goods and services is the best form of aid. And this has been challenged recently by experiments involving unconditional cash transfers (see: http://economix.blogs.nytimes.com/2013/06/20/ending-poverty-by-giving-the-poor-money/ ). From what I’ve read, the idea of directly transferring income (well to be fair, the source of the money was not specified in the experiments. It’s just purchasing power. Could come from donations, or tax, or …) is the new kid on the block in development economics.

The argument is about absolute poverty in a global sense indeed!

The argument about either absolute or relative poverty within a nation is a touch different, especially a small open economy, since the impact on prices will not be as significant.

I’m saying that prices are endogenous, and that just shifting money incomes doesn’t tell us how claims on resources change – and that this problem gets significantly larger the larger the shift in income is.

This is incredibly uncontroversial … for an economist. For many non-economists this is wildly unintuitive, and it is directly what is stated in the post 🙂

“Saying that we don’t know because only small changes can be estimated
isn’t a very strong argument against attempting redistribution.”

We know the difference of the efficacy of redistribution though – it is smaller and its impact on solving real issues of poverty are then both smaller and more uncertain. The claim in the tweets is that a certain transfer will “solve poverty” – when such a claim actually lacks teeth.

On a global scale, it may be better to focus directly on providing access to goods and services that the poor require, rather than arbitrary measures of money incomes.

Note that, on a national level, this price issue is significantly less binding – due to the ability to trade. In that case, the issue becomes one that is less about those prices, and an equity-efficiency trade-off is easier (still hard) to work out.