Critical Reasoning- The Poverty Debate

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Critical Reasoning- The Poverty Debate

It has been argued by behavioral economists in all earnestness that poverty shapes mindsets. From here, it is a hop, skip, and jump to holding that the poor are poor because their poverty prevents them from thinking and acting in ways that can take them out of poverty. When behaviorist economics speaks of poverty as a “cognitive tax”, it writes ‘action’ — the political agency of the poor — out of the equation. In such a case, the focus as well as the onus of poverty-alleviation would shift from the state — from macroeconomic policy, from having to provide employment, health and education — to changing the behavior of the poor. The structural causes of poverty — rising inequality and unemployment — as well as the behavior of the owners of capital are evicted from the poverty debate, and no longer need be the focus of public policy.

Which of these options best summarizes the given paragraph?

  1. Where decisions of the poor tend to be flawed from an economic point of view, behavioral economists believe that governments can intervene with policies aimed at nudging the poor towards the right decision.
  2. By shifting the burden of poverty alleviation from the state onto the poor themselves, behavioral economists are ignoring both the structural causes of poverty as well as the behavior of the wealthy.
  3. Given that poverty diminishes political agency and shapes mindsets, insights into how poverty affects behavior could have implications in public policy.
  4. The focus of public policy ought to be in providing employment, health and education, rather than addressing rising inequality and changing the behavior of the poor.
  5.  

    • Correct Answer
      Choice B

    Detailed Solution

    This paragraph argues that the behavioral economists are mistaken in thinking that poverty shapes mindsets. The belief that poverty taxes the thinking of the poor disregards their political agency i.e, their ability to exert power or influence anything. It also shifts the state’s focus to changing the behavior of the poor. The focus of public policy should instead be on employment, health and education and addressing the structural causes of poverty, i.e, rising inequality and unemployment.

    Now we need to look at the 4 options to see which one summarizes the given paragraph best.

    Option A - Where decisions of the poor tend to be flawed from an economic point of view, behavioral economists believe that governments can intervene with policies aimed at nudging the poor towards the right decision.

    This is certainly not the main idea of the paragraph. The paragraph argues against the belief of behavioral economists that decisions of the poor tend to be flawed from an economic point of view.

    Option B- By shifting the burden of poverty alleviation from the state onto the poor themselves, behavioral economists are ignoring both the structural causes of poverty as well as the behavior of wealthy.

    This, clearly, is the main idea of the paragraph. The causes of poverty are inequality and unemployment and the onus of poverty alleviation should be on the state. Poverty does not prevent the poor from thinking and acting in ways to take them out of poverty as the behavioral economists believe. This thinking also removes the role of the wealthy in the poverty alleviation debate.

    Option C- Given that poverty diminishes political agency and shapes mindsets, insights into how poverty affects behavior could have implications in public policy.

    This statement contradicts the main idea of the paragraph and hence is ruled out.

    Option D- The focus of public policy ought to be in providing employment, health and education, rather than addressing rising inequality and changing the behavior of the poor.

    The paragraph does argue that public policy needs to focus on employment, health and education rather than changing the behavior of the poor. However, the part of statement that reads “rather than addressing inequality” is clearly incorrect. The paragraph argues that the structural causes of poverty are rising inequality and unemployment and that these need to be the focus of public policy.

    Correct Answer: Choice (b)



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