Can America’s poor save a large share of their incomes?

Yes, they can, or should I say “Fukien yes they can”?

Bi He Liu rested his head against the sun-baked window of the Happy Travel bus and tried to enjoy the rare sensations of motion and light. Six days out of seven, Mr. Liu works a 3 p.m.-to-3 a.m. shift as a cook in a suburban Philadelphia restaurant. He rarely sees the sun — or much else beyond the kitchen stove and the two-room apartment he shares with six other men.

”The boss and the pots and pans and the other workers,” said Mr. Liu, a stick-thin former farmer from Fujian Province on China’s southeastern coast. ”That’s it.”

.  .  .

Then a stop at the Bank of China branch to wire home most of his $1,900 monthly salary to pay down his smuggling debt. Finally, he said, he wanted an hour of ”relaxation” with one of the prostitutes waiting for the Monday crowds.

”Today,” said Mr. Liu, ”I feel alive.”

And here’s Scott Alexander:

I can’t even really believe that a rising tide will lift all boats anymore. Not only has GDP uncoupled from median wages over the past forty years, but there seems to be a Red Queen’s Race where every time the GDP goes up the cost of living goes up the same amount. US real GDP has dectupled since 1900, yet a lot of people have no savings and are one paycheck away from the street. In theory, a 1900s poor person who suddenly got 10x his normal salary should be able to save 90% of it, build up a fund for rainy days, and end up in a much better position. In practice, even if the minimum wage in 2100 is $200 2016 dollar an hour, I expect the average 2100 poor person will be one paycheck away from the street. I can’t explain this, I just accept it at this point. And I think that aside from our superior technology, I would rather be a poor farmer in 1900 than a poor kid in the projects today.

In 1900, poor people were packed tightly into tenements in the Lower East Side of Manhattan.  Immigrants from Fujian province (aka Fukien) are still willing to live that way, and can save the vast majority of their incomes.  They are even willing to work the 72-hour workweek that was common in 1900.

And yet Scott’s also right.  The average poor person who is born in America doesn’t save anything.  Indeed lots of middle class, and even upper middle class Americans don’t save anything.  And I believe he’s right that someone in the year 2100 earning a legal minimum wage, even if $200/hour in 2016 dollars, will still be considered poor.

In one sense, Scott is making a point I’ve frequently made, that inflation is a meaningless concept.  He’s basically defining the cost of living as “the cost of living the way we live now.”  That’s not at all what economists mean by the term, but I’ve argued that this is how most people understand the term.  Thus if the price of a RCA color TV set was $300 in 1966, and the price of a 50 inch Samsung HDTV is $600 today, then most people would say that the “cost of furnishing your house with a state of the art TV has doubled”, whereas economists would say the price of TVs has fallen by 80% or 90%.

Why will the poor always be with us?

1.  Because we think of poverty in relative terms.

2.  We are very good at noticing subtle differences in status.  Make the differences smaller in objective terms, and they’ll still seem just as big in subjective terms.  If everyone in my department had a salary within $1000 of each other, then differences of just $50 or $100 would drive people insane.

3.  Government quality regulations are set based on average living conditions.  Hence societies tend to criminalize poverty. It’s illegal to provide goods and services at Bangladesh levels of quality to Americans.  Even SRO apartments have been regulated away; we prefer our poor to be homeless and without medical care, rather than living in substandard housing or getting treated by someone who is not a certified MD.

4.  In any society, some people are less competent than others.  By no means are all poor people incompetent, but people who are incompetent often end up poor.  (I don’t mean ‘incompetetent’ as a pejorative, rather as someone who struggles with the demands of the modern world.)  The cynical conservative says that if you completely equalized wealth tomorrow, a year from now there’d be lots of billionaires and lots of homeless people.  And unfortunately that’s true.

5.  Items 3 and 4 interact in a particularly nasty way.  I have a PhD in economics, and yet often feel incompetent when trying to deal with the complexities of government regulations (or private utilities).  The regulatory state makes things especially difficult for the poor.  Some poor people are in and out of jail for being unable to pay various government fines for violating various regulations.

What can we learn from the story of Mr. Liu?  Why could he save a large fraction of his income?  Because he wasn’t poor in the American sense of the term.  He was a culturally middle class person who happened to have a low wage job.

Should the rest of America’s poor behave like him?

I’m going to dodge that question. (At age sixty I’m too old to fall into that trap.) If you insist, I’ll just say people should do whatever they want—it’s their life.  As for public policies; that’s simple—maximize aggregate utility.  In my view you do that with low wage subsidies and progressive consumption taxes.  Not a guaranteed basic income.  But I have an open mind on this issue.

PS.   I knew that Taiwan had a few small islands, but didn’t know that they were also called Fujian province.

PPS.  I understand that Mr. Liu was not technically poor, especially in 2001 terms.  But he had the sort of low wage job ($6/hour) that people associate with the poor.  He simply worked more hours than most Americans, and spent less.  And it wouldn’t be hard to find lots of examples of Chinese immigrants who save money, despite being technically below the US poverty line.

Or about a billion people in China, for that matter.

PPPS.  I have a loosely related post over at Econlog.


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45 Responses to “Can America’s poor save a large share of their incomes?”

  1. Gravatar of JayT JayT
    6. June 2016 at 11:01

    #1 is something that I think the vast majority of people just don’t understand. I talk to people and they lament that a single wage-earner can’t support a family of four like in the 1950s, when in reality they are not thinking about a 1950s family of four, they are thinking about a 2016 family of four. There are so many more things to spend your money one today, and yet people just look at it as what’s “normal”. I find it very frustrating.

  2. Gravatar of Mike Freimuth Mike Freimuth
    6. June 2016 at 11:40

    “That’s simple–maximize aggregate utility.” Ha!

    [Apart from the gross abuse of the concept of utility, I think everything else here is spot on!]

  3. Gravatar of Christian List Christian List
    6. June 2016 at 12:22


    where every time the GDP goes up the cost of living goes up the same amount.

    Don’t people have a term for that? Like inflation for example?


    I would rather be a poor farmer in 1900 than a poor kid in the projects today.

    This sentence is really odd. I don’t see how this can be true.

    Maybe he got a point in the sense that there might have been a lot of poor farmers in 1900 so being a poor farmer wasn’t really telling much about your heredity. But when you are a very poor white trash kid in the US today it could mean that your parents are not very bright, meaning that you might not be very bright either. Maybe. But it’s not that convincing to me.

    Or maybe he means that life on farms was not as brutal as life in projects today. The good country life vs. the big city life if you will.

    Or maybe he means that being a farmer with property is of course better than being a little kid. Who would have thought so.

    I don’t think he meant all that. He basically seems to mean that “poor” farmers’ kids back then had all the possibilities in the world while the projects of the “poor” US kids today are bad in comparison. And I think he’s wrong, very wrong.

  4. Gravatar of Doug M Doug M
    6. June 2016 at 12:37

    Point 3 is crazy but true.

    To add to the list:

    6) There is so much more stuff that a person “has to have” in 2015 that didn’t exist in 1915.

    7) Some people have no restraint, and high-income or low-income manage to spend 101% of their pay check each month.

    8) There is very little personal finance education. Most of us follow the patterns we observe as we grow up. And if we have bad role models where are we to learn good financial habits?

  5. Gravatar of E. Harding E. Harding
    6. June 2016 at 12:45

    “Why are NYT editorials so staggeringly bad?”

    -Excellent question. The answer is the same as why your Trump posts are so staggeringly bad. You guys all think too much of yourselves. At least you recognize your Trump posts just might be staggeringly bad (they are).

  6. Gravatar of Philo Philo
    6. June 2016 at 13:25

    Maximize aggregate utility *in the long run*. To maximize aggregate utility in the short run a good bit of (governmental) redistribution is probably warranted; in the long run, probably not.

  7. Gravatar of dtoh dtoh
    6. June 2016 at 13:33

    Scott,
    You give too much credit to a lack of competence. IMHO, much poverty is due more to a lack of diligence.

  8. Gravatar of Rajat Rajat
    6. June 2016 at 14:43

    “Should the rest of America’s poor behave like him?”

    I find that as I get older – especially having grown up visiting my middle-class Indian relatives in the early 1980s – contemporary affluent western standards of poverty seem excessively high. My relatives lived two to a bedroom in a (rented) small courtyard apartment with a grainy B&W TV with only a fan for cooling through Phoenix-like summers and a single electric rod heater for chilly winters. They rarely ate meat and almost never went anywhere on their holidays. Oh, and they experienced daily power outages that sometimes went for hours. On the upside, they had someone to sweep their courtyard each day and got their vegetables home-delivered by a street vendor. Yet they seemed reasonably happy and I greatly enjoyed my visits there.

    It therefore galls me that every time I read a newspaper in Australia, I’m confronted by case study-type stories of people supposedly living ‘in poverty’ because they ‘can’t afford’ to pay for their child’s school excursion or their car registration. Forget $400 (from the NYT story mentioned in your Econlog post), I’m astonished that any person over 30 with a job doesn’t have $10k set aside for rainy day.

    My suggestion: set poverty-relief benefits to the level that would sustain a lifestyle that recent retirees (those aged 65-70) would consider tolerably middle-class from their childhood (ie 60 years earlier). In 2016, that would mean the mid-1950s. Of course, this would require lots of trade-offs to be made between things like access to mobile apps vs cheap childcare. But the benefit of this approach is that it would maintain a degree of relativism while avoiding the most egregious examples that make many people in the oldest one-third of the age distribution shake their heads in disbelief.

  9. Gravatar of Benjamin Cole Benjamin Cole
    6. June 2016 at 15:50

    Nice post.

    And yes, due to property zoning and the criminalization of push-cart vending, and building codes, much that could alleviate poverty (at least for the clever) in the United States has been outlawed.

    Side note on incompetent people: Interestingly enough, in the US Armed Forces we have people who enjoy on-base housing, on-base and free medical services, on-base shopping, on base restaurants and so forth. Their retirement plan is built in and available after just 20 years of employment and includes complete and free medical care provided in federal facilities. Call it initial employment to grave care by the state.

    Not everybody has the tools to survive in a free enterprise economy, and perhaps we need to expand the number of positions in Armed Force services-like settings.

    No one condemns our armed services employees for living in a communist lifestyle.

  10. Gravatar of ssumner ssumner
    6. June 2016 at 16:01

    Jay and Doug, I agree.

    Mike, You said:

    “That’s simple–maximize aggregate utility.” Ha!”

    Ha! is right, as it was a sort of joke. How to maximize utility is perhaps the single hardest task faced by humans.

    Harding, I do recognize that my Trump posts are bad. Do you recognize that some of your comments are so bad that they form unintended humor? Like “Everyone knows Muhammad’s knife was made out of iron from a meteorite”?

    Philo, That’s certainly a possibility. I’m agnostic on that question.

    Dtoh, Yes, that’s a fair point.

    Rajat, My wife also had a very spartan lifestyle as a child. As I get older I tend to get more pessimistic about ending poverty in the psychological sense, although I do think living standards will gradually improve in a physical sense (assuming we don’t destroy ourselves.)

    I sort of agree with you. Ideally you’d want a safety net where anyone willing to work full time could have at least a 1950s like standard of living. Wage subsidies would be needed.

  11. Gravatar of Matthew Moore Matthew Moore
    6. June 2016 at 16:48

    You see at lot of this type of behaviour among (mostly legal EU) immigrants in the UK. Most noticeably, I knew of a Polish house cleaner who worked minimum wage, slept in a single room with six other people and spent all her statutory holiday refurbishing her house in Poland. Once she had earned enough she was going to write young to it.

    I think of it as accustomisation arbitrage. People who are accustomed to long hours and low pay move to places where people aren’t, they sell it and then buy an above-average standard of living in their original location. As long as they don’t associate themselves with the status norms of the new location, they win throughout

  12. Gravatar of Rajat Rajat
    6. June 2016 at 16:53

    That’s where the US and Australia are different, Scott: I was thinking of the benefits offered to someone (with kids) who *doesn’t work*!

    Here, people think that anyone willing to work full-time should be able to afford at least a 1970s outer-suburban lifestyle – like something out of “The Grass is Always Greener Over the Septic Tank”. What they don’t get is that it’s already quite achievable for those who are reasonably diligent, thanks to Australia’s heavy restrictions on unskilled immigration and our centralised wage-fixation system. My second cousin, who came here from India less than 10 years ago with his wife and two children, already lives better than that. He had some background in electrics; came here and apprenticed for a few years on lousy pay, having to commute for hours a day to various sites. Now he has a new 4-br project home 30 km from the Melbourne CBD and is happy as a pig in mud, while local tertiary-educated Gen-Ys complain about house prices.

  13. Gravatar of Rajat Rajat
    6. June 2016 at 17:01

    Oh, when I mean ‘lousy pay’, I mean $A17-20 per hour. And his family lived at his wife’s sister’s place for those years. So some compromises, but very doable.

  14. Gravatar of Gary Anderson Gary Anderson
    6. June 2016 at 17:14

    I wrote articles at Business Insider telling people to consider multigenerational living. I think people are, and not with my advice. 🙂 People can share rent, utilities, cars, cable tv, etc. The cost of living has gone up. Yes, there are a few more things to spend on, but still the cost of living has gone up.

    I find this sort of post of Scott Sumner’s to be a bit forgiving of the elite, even though there is evidence that the elite have moved forward economically while squeezing the others out. For example, when too much money is at the top, it gives Wall Street a reason to get into real estate, where it has no business being. Real estate has always been where the middle class could invest and make money. There is less of that these days.

    As one investor I know says, when she went to auction the Wall Street boys had suitcases full of cash.

    And I am pretty sure that the Fed wanted the houses back for Wall Street. http://www.talkmarkets.com/content/real-estate–reits/did-the-fed-want-the-houses-back-for-wall-street?post=92305&uid=4798

    So, probably what people will do is defer some purchases until they are old enough to cash out their 401k’s. That should wreck havoc with the GDP, but it is the Fed’s fault.

  15. Gravatar of Les Cargill Les Cargill
    6. June 2016 at 17:46

    It’s not that hard to save money. Don’t marry. Work. If you do marry, marry someone that makes good money and don’t have children.

    My aunts & uncles all lived at home until they joined the military or married. These are people born from 1920ish to 1940ish. One distant cousin was a “boarding house man”.

    We’ve evolved well past the 72 hour week – it’s just a bad idea unless there’s some logistical constraint that makes it necessary. Stuff moves faster; people need to be more alert.

    For people who do symbolic manipulation it’s a great way to lose 20 IQ points. I’ve cleaned up so many messes (I’m a software guy) from “70 hour a week” guys. But they social-signalled their way to up the food chain, until that stopped. IMO, this has to be the least genuine artifact of human behavior ever devised.

    There’s a high-profile … guy out there with a blog, guy who shifted millions of units. I met him once. on his blog, he’s learning the same stuff *now* that I was learning my first five years in the workforce.

    Since we’re all so mathematically literate, for most of my life, it was suspected that the Pareto distribution accurately describes income distribution. In my lifetime, that has popped yet another Pareto distribution with a mean/media/mode of about $100k.

    Yet this is now a “disimprovement”.

  16. Gravatar of E. Harding E. Harding
    6. June 2016 at 18:48

    “Everyone knows Muhammad’s knife was made out of iron from a meteorite”

    -It was King Tut’s knife, for one, and secondly, yes, I knew that, and everyone with the least bit of interest in ancient Egypt knows that. What’s so bad or unintentionally humorous about this comment? Sure, not everyone knows that, as most people aren’t interested in ancient Egypt. But pretty much every smart, well-informed person, especially in matters of ancient history, already knew this. I certainly did. What was the point of Tyler linking to it?

    “My wife also had a very spartan lifestyle as a child.”

    -Who in 1960s China didn’t? I mean, other than Communist Party officials?

    “Don’t marry.”

    -? Marriage saves on rent.

  17. Gravatar of BC BC
    6. June 2016 at 19:23

    “…yet a lot of people have no savings and are one paycheck away from the street.”

    I have been reading a lot of comments like this and the one in Scott’s econlog post about the half of all people not being able to cover a $400 unexpected expense. Our economy must be really, really stable and predictable. If it wasn’t, we would be seeing a lot more people thrown onto the street everyday.

  18. Gravatar of rob rob
    6. June 2016 at 20:23

    Anecdotal evidence from 5 years living in Beijing: Virtually everyone I have met that makes around 300 a month saves at least 100. On the other hand lots of well educated affluent Chinese people that I know under 35 tend to go into debt spending on luxuries (buying apartments is an entirely different conversation).

  19. Gravatar of Mike Freimuth Mike Freimuth
    6. June 2016 at 20:54

    Scott,

    I thought you were half joking so I was half agreeing with your joke. Its still an abuse of the concept as “aggregate utility” is totally meaningless and inconsistent THEORETICALLY with modern utility. However, I realize you dont care much about this so I’m just speaking my piece for the proverbial record.

  20. Gravatar of Chuck Chuck
    7. June 2016 at 00:31

    I am so damn sick of hearing about inequality.

    Government statistics should be abolished just so busy bodies have less things to bitch about.

  21. Gravatar of ChrisA ChrisA
    7. June 2016 at 01:57

    I see people in the west not saving for a simple reason – they don’t really need to. Sure they have a remote chance of a serious interruption in their income, but that is pretty remote and there are lots of options to downsize their lifestyle. Very few people actually do end up on the street with no food to eat in Western countries. Mostly they muddle through. The attitude that it is shocking that few people have savings is an old fashioned one, where lack of something to tide you over bad periods could actually lead to much more serious consequences, like starving children.

    The other thing is that a lot of people would complain even if you gave them a lifestyle 1,000 times better than what they had today. I am luckily fairly well off as is most of my social circle. It amazes me what these lucky people see as problems that need governments or someone else to intervene on (a classic one was the recent take over of a golf club by Chinese investors who wanted people to pay higher fees). My take is that we need to ignore complaining more.

  22. Gravatar of Christian List Christian List
    7. June 2016 at 03:24


    Very few people actually do end up on the street with no food to eat in Western countries.

    In most Western European countries this is even close to impossible except maybe in cases of heavy drug abuse and other
    psychiatric diseases. In other words: These very few people are too incompetent (or distracted) to visit the authorities and to fill out a simple help request. (Incompetent in the sense ssumner used it).

  23. Gravatar of Jerry Brown Jerry Brown
    7. June 2016 at 05:04

    I don’t understand the reason you include the story of Mr. Liu in this post. I guess paying down debt to smugglers counts as savings in a technical sense, but that form of ‘savings’ does nothing to increase Mr. Liu’s future consumption or investment. I imagine that if we saddled America’s poor with large debts to ruthless criminal organizations we might see the same increase in work hours and ‘savings’ like this. But I don’t think that would be a good thing.

  24. Gravatar of J Mann J Mann
    7. June 2016 at 05:53

    BC, Todd Ziewicki has written a lot about the poor’s credit resources.

    When most people say they can’t cover it, they mean that they don’t have the cash saved, and in many cases would need to start paying bills late, use auto title financing, or otherwise take a step back.

  25. Gravatar of J Mann J Mann
    7. June 2016 at 05:56

    Jerry, the savings seems pretty clear – if Mr. Liu had borrowed $40,000 to get a degree or a cab license and was paying down the debt, it would pretty clearly be savings. It’s true that the investment in smuggling was required by US immigration laws, but from Mr. Liu’s perspective, it looks similar.

  26. Gravatar of Psmith Psmith
    7. June 2016 at 06:05

    I imagine that if we saddled America’s poor with large debts to ruthless criminal organizations we might see the same increase in work hours and ‘savings’ like this.

    I’ll take “what are Social Security and Medicare?” for $800….

  27. Gravatar of Benny Lava Benny Lava
    7. June 2016 at 07:36

    I think there is a generational issue that isn’t being counted. Places with jobs have high housing costs. This wasn’t the case in the 1950s. I have met many young Americans who are living paycheck to paycheck because their money is going to rent. And I really don’t see a way to fix this.

  28. Gravatar of Matthew Waters Matthew Waters
    7. June 2016 at 08:06

    “Jerry, the savings seems pretty clear – if Mr. Liu had borrowed $40,000 to get a degree or a cab license and was paying down the debt, it would pretty clearly be savings. It’s true that the investment in smuggling was required by US immigration laws, but from Mr. Liu’s perspective, it looks similar.”

    I don’t know. Mr. Liu’s smuggling debt doesn’t seem too different from the student loans, payday loans, medical debt, etc. that many poor in America try to pay down. The smuggling debt benefits Mr. Liu more than payday loans, but it’s not like he’s saving for future consumption either.

  29. Gravatar of J Mann J Mann
    7. June 2016 at 08:55

    Matthew, it’s an investment that increases his earning capacity, so I’d say it’s similar to productive student loans.

    If he had spent $40K to buy a food pushcart and spent 13 hours a day selling pretzels and schwarma outside Central Park, how would that be different? Once the investment is paid off, the earning capacity remains.

  30. Gravatar of J Mann J Mann
    7. June 2016 at 08:58

    Responded too fast. Given that the loan allows time shifting, there isn’t a big difference between:

    1) Mr. Liu saves every week in China for the day he can hire an immigration lawyer to get him into the US, where he will earn more.

    2) Mr. Liu sells pretzels outside central park and saves every week week to buy a food truck, which he will use to increase his income.

    3) Mr. Liu borrows $40K to get to the US and increase his income, then uses $1,900 per week of that income to pay off the debt.

    4) Mr. Liu borrows $40K to buy a food truck, then uses the income from working in that truck to pay $1,900 per week towards the debt.

  31. Gravatar of dw dw
    7. June 2016 at 09:00

    i suppose we could compare standard of living from the Roman empire to that of the US in the 1700s,1800s, 1900s, and 2000s. do we really want to go back to the days when slaves were the majority of the population (Rome)? or do we want to be in a world where bathers worked in the same place where dead animals ended up? or where bakers baked their goods and also where they happen to sleep? or do we want teachers without any degrees to be teaching economics say? and while some may lament the end of the 72 hour week, they dont seem to notice that even having a 40 hour week is starting to be unusual. as it seems many low wage workers tend to work many jobs to get to 40. and they struggle to get to that

  32. Gravatar of Jeff Jeff
    7. June 2016 at 09:46

    In Fredericksburg VA, there is a Chinese restaurant called Fukien Gourmet. I always wanted to send a picture of their sign to Jay Leno for one of his Headlines segments. As in, “It’s not just good food, it’s Fukien Gourmet!”

  33. Gravatar of bill bill
    7. June 2016 at 10:04

    The point of Mr. Liu in this story is that it is possible to spend a lot less than we tend to think. It’s about consumption levels. Whether he’s paying back criminals, contributing to Social Security or investing in a Vanguard index fund is beside the point for this post (even though it would matter a lot in Mr. Liu’s life).

  34. Gravatar of dw dw
    7. June 2016 at 12:09

    it certainly is. and no matter what you choose or how you manage your money, some one else will be absolutely certain you are wasting your money

  35. Gravatar of Matthew Waters Matthew Waters
    7. June 2016 at 13:03

    Yes, the difference is the smuggling loan was to increase Mr. Lui’s future earning capacity.

    Where I disagree is the idea that the American poor by contrast get to spend all of their take-home income on discretionary spending. Many forms of debt for the poor are pretty pernicious in how their fees grow far beyond the original debt.

    Probation is the worst example of this, by far. Low-level tickets often go over to private probation companies if they can’t pay. So people who aren’t poor aren’t exposed to this probation underbelly. They just pay the ticket. If the poor can’t pay the ticket at the time, then they go to probation and eventually pay far more than the original ticket. Probation fees are senior to paying down the underlying debt.

    The other kinds of debt the poor face are not technically involuntary. For medical debt, if the poor don’t have insurance, then ER charges are far more than what insurers pay. Other debt is less sympathetic, such as payday loans, but these businesses are generally built on obfuscating true terms for those with less ability to make financial decisions. There is one chain of stores that only operate outside military bases, where they target newly enlisted 18-22 year olds with money for the first time in their life.

    I’m just saying it’s not quite as simple. The poor DO make poorer choices, certainly, but it’s not all explained by that.

  36. Gravatar of Bill Ellis Bill Ellis
    7. June 2016 at 13:06

    Mandate savings and combine it with a UBI. Make it so that a certain % of the UBI must be saved. Provide no cost IRA like investment vehicles. After a minimum level of savings is reached … Allow the excess savings to be used tax free for small business or real estate investments.

    The UBI should start at birth for every american….with a lager % of the minor’s income UBI going to savings… The money in the minors savings could not be accessed by the parents, ever… or the child until they turn 21.

    Its an attempt at channelling some UBI into universal investment wealth…(UIW)

  37. Gravatar of Bill Ellis Bill Ellis
    7. June 2016 at 14:37

    Benjamin Cole,
    nice..

    “Not everybody has the tools to survive in a free enterprise economy, and perhaps we need to expand the number of positions in Armed Force services-like settings.

    No one condemns our armed services employees for living in a communist lifestyle.”

    Bravo dude.

  38. Gravatar of Jerry Brown Jerry Brown
    7. June 2016 at 16:22

    Thanks everyone who responded to my comment. But most of you missed the “ruthless” aspect of the collectors of Mr. Liu’s debt. If you owe people money and you think they might be willing to physically hurt you. or worse, your family if you aren’t able to pay, then you have extremely strong incentives to make sure you are able to pay. Now maybe the person smugglers in China are ethical criminals who would not resort to such tactics, but that is not my impression. The debt Mr. Liu owes is in no way comparable to a government guaranteed student loan in this country, even if student loans are not dischargeable through bankruptcy. Mr. Liu likely has extraordinary incentives to repay, which gives him extraordinary incentive to work very long hours at very low pay. His arrangement should in no way be held up as an example for poor people here.

    Couple that with the limited jobs available to an illegal immigrant and the very poor bargaining position that will put him in versus his employer, and you have a borderline slave situation.

    And to compare a percentage tax on income like Social Security to his debt to his smugglers is beyond ridiculous. If you don’t work, you owe no social security tax. What would happen to Mr. Liu if he was unable to work?

  39. Gravatar of ssumner ssumner
    7. June 2016 at 17:41

    Gary, I consider middle class Americans to be “the elite” because I have a more realistic view of what the world is actually like than most people, or at least most Americans.

    BC, Go to a shopping mall in a working class area, and look at all the “stuff” that people are loading into their minivans and SUVs. Something doesn’t compute.

    Matthew, You said:

    “The smuggling debt benefits Mr. Liu more than payday loans, but it’s not like he’s saving for future consumption either.”

    Sure he is, he probably wants to live in a big three story house in a village in Fujian province.

    Everyone, Some good comments but some people also misread the post. I said nothing about whether Liu’s lifestyle is a good idea or not.

    The poor can save a lot. Whether they should is a much different question, as many commenters pointed out.

  40. Gravatar of Jerry Brown Jerry Brown
    7. June 2016 at 21:28

    Look professor, you titled your post “Can America’s poor save a large share of their incomes?”. You begin it with “Fukian yes they can”. Then you excerpt from a story about Mr. Liu, apparently to support your first sentence. Anyone reading this post will understand that you are using Liu’s story as an example as to how American poor could save if they really wanted to. Sure you said nothing about whether Liu’s lifestyle is a good idea or not. But intentionally or not, you put it up there in a way that anyone would think you prescribed it for the poor in general. Which is why I asked why you included it in the first place.

  41. Gravatar of ssumner ssumner
    8. June 2016 at 10:44

    Jerry, You said:

    “But intentionally or not, you put it up there in a way that anyone would think you prescribed it for the poor in general.”

    You mean anyone who lacks good reading comprehension. Or perhaps you never finished reading the entire post:

    “Should the rest of America’s poor behave like him?

    I’m going to dodge that question. (At age sixty I’m too old to fall into that trap.) If you insist, I’ll just say people should do whatever they want—it’s their life.”

    I don’t make a practice of recommending that people save more, and did not do so in this post. I tend to assume that people are rational, unless proven otherwise.

    I included it as an example of the fact that low income Chinese are able to save a lot of money. That’s the only point.

  42. Gravatar of Jerry Brown Jerry Brown
    8. June 2016 at 16:52

    Professor, you are of course correct. Technically. You do not explicitly recommend Liu’s situation as a blueprint for America’s poor. As you say, you dodge that question.

    Which led me to ask why you included his story in this post.

    Which you have now answered. And I appreciate that. I realize you are under no obligation to respond to my questions, or even to allow me to post comments. I am very happy that you do allow that and, honestly, quite flattered when you respond. So I thank you. Even though I’m going to disagree with you somewhat.

    I have said before that you are an exceptionally talented writer. And that is not just compared to other economists who write blog posts. You are able to make ordinarily boring topics quite interesting and you use your writing skills very effectively to make your point in your essays. As such a talented writer, you should be aware of how placement and emphasis in an essay can direct the reader towards the point you wish to make, even if you insert sentences that a lawyer might use to show you took no position on.

    Reading comprehension has rarely been one of my problems, and I have read this post seven times now, three times before the first comment. I will stand by my statement- intentionally or not, you put it up there in a way that anyone would think you prescribed it for the poor in general. Well, maybe not a lawyer.

  43. Gravatar of Floccina Floccina
    12. June 2016 at 05:27

    @Jerry Brown the point is that it is possible for relatively low hourly wage workers to save $1,900/month if it is important enough to them. Here is a guy for whom it is important enough. You may prefer his story to Bi He Liu’s

  44. Gravatar of Matthias Goergens Matthias Goergens
    15. June 2016 at 17:37

    @Philo:

    > Maximize aggregate utility *in the long run*. To maximize aggregate utility in the short run a good bit of (governmental) redistribution is probably warranted; in the long run, probably not.

    Good point in the abstract. In reality, you can redistribute like crazy, just make sure you tax the least elastic stuff. (There are some widespread economic goods which even have zero elasticity. So you can tax these as high as you want without negatively impacting the ‘invisible hand’ of the economy.)

  45. Gravatar of asdf asdf
    14. July 2016 at 17:06

    High IQ high time preference Chinese can behave like XYZ.

    Therefore we need to flood the west with low IQ low time preference Latinos, Africans, and Arabs who have absolutely no track record of behaving in such a way. Also these groups behavior represent negative externalities that are one of the biggest drivers of rat race price bidding wars that have sucked up nearly all income growth in the west for decades (bidding up real estate away from such people, paying for education away from such people).

    When they inevitably vote themselves other privileges we should be happy about it because I’m pretty sure NAMs voting themselves freebies from these rich elite white middle class people will increase “global utility function”, which is the God I choose to worship.

    Also, that Chinese guy I mentioned is probably racist and experience shows he would be extremely against immigration of lesser races to his own country.

    Lastly, all of this is demanded because I’m really really pissed that white people in America have running water in their apartments and my wife had to live through Mao, which is somehow white people’s fault. So I hope they all end up living in crime and dysfunction filled NAM hellhole neighborhoods, the privileged assholes. Also the fact that I’m wise and altruistic enough to see this is why I’m a better person then you.

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