 you to wider for organizing this and inviting me and it's a pleasure to be back in wider. I think I was involved in the very first wider research project back in the mid-1980s and I've come back regularly since then. This presentation is really an extended version of my first lecture to my second and third year PhD students at Georgetown and like economists pretty much economics PhD students pretty much all over the world now I figured they correctly that they didn't know much about the history of thought how they come to think or we come to think the things that we think in economics today. I didn't know much more than that so I started preparing this first lecture and it took me a month of reading and three months later after the lecture I'm still reading and it's fascinating it's like a puzzle trying to put together a puzzle of really how we came to think particularly about anti-poverty policy the way we do today and I don't pretend that I've solved this puzzle every I've done this talk a few times now and every time I after somebody makes an observation or during the talk and it helps me some one of my favorite things is to visit colleagues libraries and find the oldest book I can find there and I often find some little bit of the puzzle in somebody's library so I'm still trying to stitch it all together and any input is welcome but I hope you'll at least sympathize with the objective. About six weeks ago and two months ago Jim Yong Kim the president of the World Bank came to give a lecture at Georgetown which he said is there anyone today who would not commit to eliminating poverty and he's prompting oh we all agree to this maybe we don't I'm not sure I think probably he's right that most people do agree that 200 years ago they didn't this is a relatively new idea I'm going to address both of these questions how do we come to think about eliminating poverty it was a legitimate goal what types of policy has merged I'm going to focus here much more on the first question the full paper which is now clocking 120 pages and still increasing has about a 40 page section on that second question but I'm not going to have a lot of time for that three premises are now widely accepted poverty is a social good poverty can be eliminated and public policies can help do that but these premises were not widely held 200 years ago and there's been a dramatic change in our thinking if I can summarize that in just four quotes if we start with Philippe Hackett a prominent medical doctor and also well known for his childhood work in Paris in the mid 18th century the poor are like the shadows in a painting they provide the necessary contrast a bit later Arthur Young an agriculturalist economist statistician in England everyone but an idiot knows that the lower classes must be kept poor although will never be industrious Alfred Marshall bit over a hundred years later I think everybody who knows who Alfred Marshall is was maybe we out now out grow the belief that may we not outgrow the belief that poverty is necessary and finally the motto of the World Bank our dream is a world free of poverty what I'm going to try and do is document the the history how did what explains that transition what were people thinking behind each of those quotes and how do we move between the first quote to the last quote what happened how did it happen if I can start with a simple expository model I find this model useful for a lot of purposes in thinking about development generally some version of this model we imagine a credit constrained economy the credit market is imperfect individuals can borrow up to lambda times their wealth each person is a strictly concave production function a standard kind of neoclassical production function a fixed rate of interest they have a desired capital stock K star here see if I can the desired optimal capital stock will create the marginal product of capital the interest rate those with initial wealth less than this critical amount K star over a lambda plus one a credit constrained there they would like to invest more they would the marginal product of the capital is greater than area of interest they'd like to drive that marginal product of capital down but they can't we have then now introducing this model and that version of this model you can find in many papers there's a very nice paper by Abhijit Banerjee as to flow in the journal economic growth which has a version of that model and laid out very succinctly let's introduce into that model standard neoclassical endogenous growth model some version of many models we've had let's introduce a threshold capital stock let's say there's some minimum level of capital you need to be productive in the future now we can motivate this in many ways a path of descriptor is in a book many years back now a path of descriptor outlined an argument which would motivate it in terms of the existence of the basal metabolic rate the fact that you have a minimum level nutrition needed to do anything so you're sitting in this room you're probably on average burning about 1300 calories per person listening to me not much more expect to do anything productive physical to earn any income from labor you're going to have to have an input calorie input greater than that you're going to have to burn more than something like row and average of 1300 calories per person so that's 1300 calories is an example of this came in there are other examples we can think about the type of technology the minimum capital requirements and that technology and so on that means that we have a story of multiple equilibria we have three possible equilibrium this economy I've labeled them a b and c here now in each one of these equilibria this is a wealth dynamics this is the description of the wealth dynamics each one of these equilibria people have got a varying income at the equilibrium at a in the destitution equilibrium the income is fluctuating the income as the consumption equals income because they're not accumulating anything there's no point accumulating anything that produces it has no marginal product nothing they can't produce anything till they get to came in that's a classic poverty trap I'm going to talk about two types of anti-poverty policies motivated by that model protection policies and promotion policies that distinction comes from Jean-Dres and Amalfi Sen in their book hunger in public action and I'm really elaborating or formalizing that distinction in terms of a model of poverty traps a protection policies of those policies are short-term palliatives that are needed to try to smooth help you smooth things out any one of those equilibria in other words it's something that helps you either deal with the income shocks the income fluctuations or to smooth consumption given the income fluctuations so that's protection policies promotion policies in the other hand are things which try to move you between those equilibria try to get you out of that poverty trap in particular the going back to this that poverty trap at a you have to get a miss a minimum level of capital needed to get out of that poverty trap the equilibrium at B is unstable you need to get to the equilibrium at C this is a recursion diagram for every individual every individual has their own recursion diagram so a promotion policies is something that helps you get from A to C anti-poverty policy I'm going to define as essentially the combination of these two things I'm going to assert that you need both anti-poverty policies incomplete if it only has one of the two and political philosophy the idea of the rights-based definition of distributive justice has been is now I think the most common definition you'll find coming out of John Rawls and Sam Fleischeker others I'm going to depart from that definition I'm kind of sympathetic up to a point but I'm going to put much more economics into the discussion of distributive justice and I'm not going to use that term distributive justice although I recognize there's a there's a close correspondence part of the reason for that is that when we talk about in the development context we realize that government states do do all kinds of things to ascribe legal rights but often with very little meaning it's good intentions the country I probably worked on the most India is full of such good intentions symbolic interventions that try to claim all kinds of wonderful things but are rarely credible the mystery remains why they persist so instead the focus here will be on how policies help do both of these things and I'm going to basically describe the history of thought on anti-poverty policy as a transition for between two equilibria if you like two equilibria of the political economy one in which only protection policies existed protection policies will I'm going to show you go back a long long way to at least 300 BC protection policies are the first equilibrium the second where we have both protection and promotion policies that's a very modern idea in fact I don't think we really reached that second political economy equilibrium and where you think about anti-poverty policy in the way we implement anti-poverty policy until late in the 20th century it is quite recent so the history I'm going to start with a mercantilist we can go go back earlier but this is an obvious starting point the mercantilist basically saw one objective for an economy summarizing things you probably already heard about which is the to maximize the country's export surplus the trade balance and the means of doing that were cheap inputs cheaper all materials the colonies were crucial from that point of view and cheap and therefore poor labor at home now of course the balance of trade is zero globally so this is a zero-sum game where you envisage economic policy is each country struggling to do a bit better and that would be the expense of some other country would be doing a bit better is defined by the balance of trade let's put a lot of emphasis on the cost of inputs the compare the effectiveness of the country to expand its exports poverty was seen as essential to economic development in that model the idea was that by by having lots of poor people they you would keep wages low and you would hence expand the balance of trade make the regime more powerful globally and that was a good thing there are a lot of arguments here and one of the phrases that I like the most here is from Furnace what he is later actually you know about 1920 the utility of poverty and the idea here was that poverty was essential to economic development as Joseph Townsend wrote in 786 the poor know little of the motives which stimulate the higher ranks to action pride honor and ambition in general is only hunger which can spur and go them into action so essentially we're talking about here as in a negatively sloped inverse the negatively sloped labor supply schedule in which the income affected is a domination substitution effect and the way that was translated into the writings of the time is very simple with higher wages what would happen people go off to the pub and spend the money and here's a picture of an 18th century pub this is the best picture I could find pretty much the only credible picture I could find just to entertain you in the midst of all this one of the most influential writers a controversial in his time not so much for the views that I'm going to talk about today it's a guy called Bernard de Mandeville there's a quote from de Mandeville there's some really chair wonderful quotes from de Mandeville but the shores wealth consists in a multitude of labor is poor and great numbers of them should be ignorant as well as poor so the idea of a promotional policy through education was absolutely abhorrent it didn't make any sense to the mercantilists and people like de Mandeville I'm going to try and explain why it didn't make much sense to them and why it wasn't just a simple awful thing and that would be back to that poverty trap de Mandeville was saying essentially a little bit of education is going to do no good whatsoever is absolutely pointless oh that's exactly what would be predicted by that poverty trap model if the working class and in the dynamics of this thing we can easily write down a model where you end up with the working class essentially concentrated at point C there the poor others at point sorry point A not C others at point C what will happen then a small amount of schooling is not going to do much good you're going to need a large amount of schooling and that's going to cost an awful lot of money so really it's it's not a big surprise in fact while I was reading roughly the same time I was reading de Mandeville's seemingly awful views which maybe a little bit ago maybe you're explicable I was reading Catherine Boo's wonderful book behind the beautiful forever's if you haven't read it I strongly recommend it it's a non-fiction but describing a life in a Mumbai slum the slums that used to exist around Mumbai Airport and at one point she describes Sunil a young scavenger living entirely by scavenging around the airport and Sunil was a smart guy roughly ten years old nobody's quite sure and he'd been understood there are three ways of getting out of poverty Sunil said this at one point in the book one it one is entrepreneurship the other is politics or or corruption they were one way not two ways and the third was education he didn't he didn't see much hope for the first two because we thought he'd get a bit of education so he went to the school was being run after hours the main school was not was was empty during working hours after hours there was a school run by somebody in the slum who was doing a some kind of tertiary degree and she ran this school after hours and you see this all the time all over the developing world particularly in India Sunil started to do the schooling for a few days and a lot of wrote learning he'd sat in his English class for a few days mastering the English twinkle star song the first I heard what is she talking about the English twinkle star song not having been schooled in England I was I guess I missed something so I looked that up twinkle little star how I wonder what you are you probably know this this song and anyway Sunil after three days of this all they could do is master the twinkle star song and decided this isn't for him it's not going to feed himself this way he did exactly what demand of all predicted he quit schooling no point he was in that low equilibrium that poverty trap I did a lot more than the twinkle star song to get him out of poverty protection has a long history and this is not maybe fully appreciated but if you go back into into history you'll find back more than a couple of thousand years even you find lots of references to protection as an anti-poverty policy is nothing particularly new here one of the oldest themes famously Kottilya also known as Chanakya was arguably one of the first economists in 300 BC in India advisor to royalty giving advice on all kinds of things and prominent in that advice was his instructions to to the king in the time of famine institute the building of forts or water works with the grant of food or share provisions with the people or entrust the country to another king as pretty stern advice to give the the head of state at the time India still has a as a puts a lot of emphasis on protection policies and actually including some of the policies that Kottilya advocated 300 BC moving along the Elizabethan poor laws are another example of protection policies a famous example merging around in the 16th century and Elizabethan times a system of locally implemented poor relief a parish base through state contingent probably redistributive taxes locally on the property owners cash transfers paid condition on things like old-age unemployment widowhood huge shocks and so on now the poor laws were the mercantilists were totally cool about the poor laws they didn't they thought that was just fine it made perfect sense to them in fact the the the idea of the state of solving the role of social protection with a lot of sense now we're in a post slave owning society when the slaves when you're a slave of course the slave owner internalizes the the protection role because this is your property in a post slave owning society the fulism has also collapsed we need it's they the mercantilists understood that you needed something to take over that role of social protection and the state was the only candidate and the local state in particular the poor laws were very uneven policy and some some good respects and some and some some models some ways models for modern work social protection policies other other respects including the decentralization they were problematic but it's a mixed record okay that's the background to what I'm going to call the first poverty enlightenment this diagram if you don't recognize it is a picture from the Google nGram viewer this is an amazing invention or just only a two years old now where it's possible to read all of the books in Google library essentially what you're doing is searching all of the 10 million books that are digitized now you're searching them for a word back to 1600 and then you plot the instance of that word so here I've run the Google nGram viewer on the word poverty back to I do this back to 1700 back into the 1600s very very noisy or a very few books published digitized remaining or could be digitized the quality the deteriorated so much but from 1700 starts to look a bit sensible and I think pretty reliable from 1800 huge expansion the incidents of the word poverty here on the vertical axis is the percentage of all words in digitized books all words the percentage of all words which are the word poverty so it's the incidents of the word poverty in the English language I'm also going to use incidents in the French language later but for now it's just English huge expansion and I'm going to call that the first poverty enlightenment I'm not identifying the first poverty enlightenment from the nGram viewer I'm identifying it from a literature one of the beauties of the nGram viewers you click on any one of those years you can find all the references all the books and you can actually look at the context so you don't have to I don't pretend to have a super fast reading speed so I'm not distilling all of this wisdom from a vast amount of reading a lot of reading but the wonder of the beauty of the Google nGram viewers I can actually find the reference and I can see for example is the word poverty does have the same meaning as the word has today and that's an important issue the linguistics of this and the in the construction of words and their meaning is absolutely critical I have another paper just on how to interpret Google nGram viewers I'm not going to go into that okay changing popular attitudes around the latter part of the 18th century and this was really a dramatic change lots of things happening in popular resistance in the coffee houses of London and Paris of the lots of things going on the London corresponding societies and a famous example here's a picture of a meeting of the London corresponding society they weren't actually sitting and talking about overthrowing the state they were in France at the same time but in London they were more talking about radical ideas like suffrage the vote that was a big thing you realize that suffrage the the struggle for suffrage took 50 70 years of struggle these kinds of meetings and the London corresponding society and others in literature dramatic changes happening it's just explosion of criticism of people just questioning hierarchies in this 20 year period there's a series of books a classic series written in in the 1930s the history of Europe as a tour of 12 volumes I think in this history of Europe some volumes covering like three four hundred years the volume that covers this period covers 20 years is one of the thickest volumes that's just a kind of measure of the intensity of what of that period in thought and it wasn't just the French Revolution but a whole lot of things happening and literature examples like the marriage of Figaro play in the 1780s that initially banned by Louis the 16th and we know what happened to him and it was a radical all kinds of radical ideas and the famous speech in the fifth act of the marriage of Figaro where the the servant is questioning the authority of the master in this case he was questioning the master's authority to implement a very old idea that still existed then actually still exists in some developing countries now it's unusual but it's still there whereby the the Lord of the master had the right to sleep with the bride on the first night the master was claiming this right over Figaro saying I get your bride on the first night and this or a totally objectionable idea motivated the the play at one point in the play Figaro says what have you done to deserve such advantages put yourself to the trouble of being born nothing more for the rest of very ordinary man Adam Smith comes along and Adam Smith is an amazing character I think like as a martyr said and and Emma Rothschild also argue I really think Smith has had a raw deal I mean the guy was one of the most progressive thinkers of his age and progressive even by modern standards Smith was umbusting the mercantilists and the really I the idea of the wealth of nations was essentially a bores down to a critique of mercantilism and most importantly rejecting that idea that the balance of trade could be the metric of social progress we needed a broader conception of welfare the covered command over all goods promotional anti-poverty policies the very lot the logic of promotional anti-poverty policies really is found in Smith and I typically many many respects emerged out of Adam Smith's writings not just the wealth of nations his writings on moral philosophy were equally important Rousseau Jean-Jacques Rousseau was important here partly because of a book that is discourse on the origin of inequality which just took a Hobbesian type social contract view of thinking about what the what a just society would look like but argued unlike Hobbes that in the natural state people would have some degree of empathy and natural state being take away the idea of the social contract was that this type of thinking was that imagine the situation without the extreme counterfactual imagine doing an evaluation of all social organization imagine taking away all of that social organization that's the counterfactual and that's called the natural state in in in this this tradition in moral and in philosophy um and how and Rousseau argued to be degree there's a natural natural empathy in human beings something that's because echoed from from research on mirror neurons and all kinds of exotic things coming out of neuroscience but also um and biology and behavioral work in modern times um so basically that that the idea the institutions of the society with with things that could create inequality wasn't it wasn't something that was in was the natural state of human beings it was something we created institutions emerged the very idea of poverty then was not inevitable that that's that that that's something that the beginning of it just an amazingly radical idea um inequality was really um important here and and here I've given you a plot in in French this was important in in in French and the poverty poverty and the red line inequality is just showing that the dramatic increases in the in the mid to latter part of the 18th century um and and here's poverty in French uh in English however sorry no sign of it very much the attention to inequality was very much coming out of writings in the French language not so much in English language in English language was much more dominated by the idea of poverty Emmanuel Kant um along with Rousseau maybe even more important from Rousseau for another radical idea that um people had a moral value we should judge societies by by the welfare of people where did that idea come from well a germ of it in Kant in the foundations of the of the metaphysics of morals the very idea that that emotional identification the very idea that that that people could should not be treated as as as means that they were ends in themselves um and that was hugely important that all people had moral value had moral worth um again important the idea of charity this is something I had no idea about until I started writing this paper um your charity has been around forever of course and and and and many people thought of of helping the poor as only being about charity and that was the the popular view and some people hold that view today um philosophy and theology had always applauded charity uh Kant really questioned that he said is that a respectful relationship between the rich person and the poor person can't we have a more respectful relationship one in which he as he saw it rich people were giving to poor people for the value they got out of being the donor the the power that they had the prestige they had and so on um Kant was arguing couldn't we find a more respectful relationship how are you going to get that respectful relationship you're going to have to have the state take over the role of charity and that was the beginning of the I I would argue the germ of the idea of this important germ of the idea that the state had a role in redistribution um in all of this the liberty equality fraternity were key ideas the motto of the French Revolution and some hundred years later the motto of France um interesting liberty is is really what we understand as liberty today equality is was really a quality of opportunity it's it's curious today we're seeing a re a resurfacing of a quality of opportunity and we talked about it last night at the at the wider lecture but we're seeing a resurfacing of the idea of equality opportunity and equality of results has been I guess the main thing we think about in the way we characterize and according measure inequality historically but actually the origins of the other way around equality of opportunity was the was prior in historically to the idea of equality results equality results was an incredibly radical idea this was just unimaginable in fact the guy who's is often credited with inventing that there was a fellow called gracious Babouf um a revolutionary um tried to start a second French revolution around the radical ideas like progressive income taxation when one man one vote uh in his efforts to mobilize the second French revolution around that idea he was uh executed in 1797 so uh not uh equality results was a little bit too early for for people then um a progressive market economy where did this idea come from where did we we we get the idea that a market economy could actually help against poverty that took a long time to develop in fact through most of the 19th century it was just accepted that that market economies capitalism was not going to be good for poverty reduction it was it was good for other things but not poverty reduction um in fact people were very pessimistic about the idea of um labor augmenting economic growth and so on the the classical economists did believe that that I thought the marginal part of labor would shift with um technical progress that the growth would be labor augmenting but they didn't think that it would ever increase real wages the argument being that in due course population would increase again it was back to this idea that behavior of poor people was the cause of their poverty if you gave them extra wages they'd go to the the ale house and they'd reproduce more the population would shift the supply curve back and we wouldn't see any any net increase in the wage rate and we wouldn't see poverty falling the Marxist the Marxism emerging in the mid the strongest intellectually strongest form of socialist thought emerging the mid 19th century came to exactly the same conclusion for a very different reason than Marx it was the reserve army of the unemployed would keep wages low but from both points of view classical Marxist economic thinking there was just no hope for poverty reduction through an expanding market economy the only hope was moral restraint by poor people but nobody was really making the connection to social policy there what would be the role and people like john stewart mill were were supportive of education but not by the state they understood i think that the role of there was a role for education in in in in essentially preventing that supply curve shifting back which would mean that that the technical progress could increase real wages but didn't happen it was there they were very pessimistic about it in fact this is an interesting window and a lot of current debates too and the debate between Gregory Clark and Robert Allen on the so-called revisionist view and the lagged view on on on weather the industrial revolution reduced poverty essentially how long did it take the industrial revolution to increase real wage rates and of course remember the poor essentially the working class here the connection from the real wage rate to poverty was just very strong how long would it take in fact it really comes down to a debate over whether real wages took like 20 years or 40 years to adjust to the technical progress coming out of industrial revolution but they did adjust in fact the pessimists both the classical and Marxist if they had data they looked at whatever data they they had more closely i think they would have seen the beginnings of how that that technical progress was was going to eventually reduce poverty the question is why it took so long we now i think the benefit of hindsight and important economic historians like Galen and Clark what we really learned is the industrial revolution did reduce poverty it just took a long time today with the lags are much much lower but why they were so long why it took so long is is an interesting question there are different arguments there's a lewis model you could think about i don't find that terribly plausible because a hard for example if you think of england as fitting the assumptions of the lewis model but maybe you could make that argument england around that time there are also arguments about the the workers were too poor to save so the only way that you could get capital accumulations by rising but by assuring that most of those profits were turned back into investment um other arguments too i think the importance of financial institutions was key here um the mobilizing those savings because you know you think about that other of that argument about mobilizing capital which is is actually from robert allen you think about that argument it's really um not terribly convincing because in fact you don't you would need poor people to save absolutely nothing the working class could say we have to save zero and that's not believable then the issue is how do you mobilize those small amounts of savings so really the financial sector development and lack of a development doesn't exist financial sector pretty much for for most people in their lives um that's that becomes the issue another very important factor that i don't think has had much attention is that what was happening to food prices what happened to technology there the invention of of the refrigerator the latter part of the 19th century transport suddenly we saw food prices falling dramatically in western europe just out of technical innovation okay controversial forms to the poor laws this is a a a bit of the history that needs a just a a little bit of attention because it so reflects and mirrors things we debate now and these are the debates over the poor laws in around 1830 really the first part of the of the 19th century and in england because the poor laws were in england the the history a little bit was was as i see it the english elites were very worried about the french revolution spilling over the channel very worried as you can imagine and what with the london corresponding society we weren't sure what they were talking about but if it's a very worrying too there was a lot of concern so it took a while for the resistance to anti-poverty policy from the from the land holding classes who were essentially financing the poor laws it took quite a while for for for this um re this rejection or this resistance to the poor laws to to evolve at the same time the cost of the poor laws is rising substantially it was getting to around 2.5 percent of england's gdp now there's nothing compared to the cost of modern welfare states in western europe but but you know 2.5 percent is 2.5 percent i mean we consider that a huge anti-poverty policy in the developing country today not even in india with the national rule employment guarantee scheme we're talking about 2.5 percent there we're talking about more like one percent of gdp and that's the big that's the grand daddy of them all today so incentive effects were brought out i don't believe the arguments about incentive effects the arguments that the poor laws would discourage work efforts and so on i actually believe now that those arguments were a product of the political economy it's not that people were thinking about incentives as a concern uh i think unfortunately i've come to think that people like david rickardo were really using incentive arguments and you read rickardo carefully on this and obviously an amazing guy but he's really um he really what a stretch and he's exaggerations about incentive effects he had no data he didn't know anything about the labor supply elasticity and he had no idea but making grand exaggerations of these incentive effects town's end was important too but um rickardo was of course far more important to to economics and exaggerations when there are plenty of quotes in this exaggerations were extreme but there are policy response exactly like we see a universal scheme like the the poor laws we see today in developing countries the policy response is targeting as you might know this is something i think is greatly overplayed as an instrument for anti-poverty policy uh the arguments about targeting in those days took the form of the work houses essentially what we did is they did is expand the presence of work houses the work houses had started in Amsterdam in about 1600 but it were very big in in in England and London there were about 85 90 work houses massive expansion in the role of the work houses essentially you criminalized poverty you insisted that poor people had to be imprisoned if you like in these work houses they would get there uh you and you'd control their behavior they would be paid they would be fed uh but they had very limited freedom and that was essentially the extreme form of a work fair scheme imposing work requirements on welfare participants a very extreme form famously attacked and almost as soon as the reforms to the the poor laws started in in 1834 as i recall the the um resistance came and famously in in Charles Dickens Oliver twist the opening chapters describe life in the work houses and this is the best cutest picture of an Oliver twist i could find but it wasn't just the social commentaries like Charles Dickens Benjamin Disraeli a very famous conservative politician who became prime minister of England was equally critical of this policy essentially they've taken the targeting argument far too far and essentially from a utilitarian perspective this didn't make any sense really you're ignoring the welfare losses of poor people you're ignoring the stigma you're ignoring the foregone incomes of work fair participants the fact that they will be doing something else if they weren't in the work houses from the economic calculation was was really close to pathetic and the same is true today when people talk about targeting you look at the economics of the argument you'll see lots of hidden costs you'll see lots of assumptions take it very be very careful about that sometimes targeting helps sometimes it's really not in the interest of cost-effective poverty reduction so i've covered that targeting fetishism incentives and redistribution continuing discussion debate and i've mentioned a bit of that so i'm lagging on time so i'm going to move on the emergence promotional policies in the late 19th century so although this wasn't what i call a poverty enlightenment the first poverty enlightened latter part of the 18th century second poverty enlightened we're going to come to but if there's a long period between the two but there's a real upturn around the latter part of the 19th century the emergence of social policies more progressive social policies the emergence of compulsory schooling in in most countries england was lagging substantially in this but throughout the the rich world with very few exceptions i mean massachusetts it was an early example but very few exceptions and prussia was was was was big on early schooling on as early on compulsory schooling but for most countries we didn't see any sign of this substantially into the latter part of the 19th century and new thinking on poverty this is i love this quote from alfred marshal the inequalities of wealth and especially the very low earnings of the poorest classes are dwarfing activities as well as curtailing the satisfaction of wants this is the earliest reference i can find to the idea that that poverty is not just a a negative from the point of view of social welfare that you you've got poor people and that's you know you you know the sign of your aggregate social welfare function with respect to their welfare it was also that it was affecting activity that poverty was was costly to economic activity there's dwarfing activities as well as curtailing the satisfaction of wants and that's a thing that didn't really come back it was was under the surface bubbling under the surface for another hundred years came back in the latter part of the 20th century empirical research on poverty i think i've talked a lot about the philosophers and so on in this talk but i think there was a parallel but less less exposed less obvious lines of research on on the evidence and one of the powerful things you realize in looking at this is just how important data on poor people was to the public consciousness to motivating policy and you see so many examples of this in in the literature many examples before Booth and Roundtree Charles Booth and Sheba and Roundtree but but they were important Roundtree was the people know Roundtree's chocolates is the started Roundtree's chocolates in York England looking blank you know New York Peppermint Patty they're really good anyway Roundtree okay and he he's he was being criticized by people in local prayer saying that his his um his workers were all poor and he said no they're not I pay them decently so he decided he'd do a survey and he did do a survey of his workers he did a very careful quite elaborate survey and came to the conclusion yeah they're really poor and they were Charles Booth was doing something similar in London but in a much more scientific scientific way very elaborate series of this is pre-sampling the one thing was missing here was sampling but in terms of the carefulness of the surveys this is really exemplary stuff and setting poverty lines and so on and that was all around 1890s and also incidentally Charles Booth whose credit was inventing the poverty line around 1890 although there's antecedents of course but Charles I've been trying to figure out what was the value of Charles Booth's poverty line in relative to poverty lines today and I can I can believe you know it's got to make assumptions but I can believe it actually was comparable to poverty lines we find in developing countries today for example I don't think Charles Booth's poverty line in London in 1890s was that different to India's poverty line in the 1990s um you can imagine in a difference curve on which both you reasonable and difference curve on which you'll find both of these poverty lines it's not there's obviously substitution differences in relative price differences and so on but it's believable this wasn't a radically different no way this was a this is not a radically different poverty line poverty was being judged in 19th century England the say a similar way to how poverty is being judged in developing countries today uh schooling this was emerging over the in a mid from about the mid 19th century debates about schooling the the capitalists were particularly in the industries depending on child labour were hugely resistant and it took decades to get this through the resistance to to the idea of compulsory schooling to to state schooling in particular was very very strong and with very few exceptions it took a long time the idea of targeted tuition subsidies everybody realised I think there was this economic gradient in schooling they realised it was poor kids who weren't primarily were not in school the rich kids were in school and they understood the economic gradient but took a long time to sort to begin to develop policies that actually acted upon that gradient what would such a policy be you'd have to subsidise poor kids being in school to compensate for their foregone income to compensate for child labour you gotta remember this time kids would go working class kids were going to work from about the age of seven in the early 19th century that was quite common um you really have to compensate for that foregone income that's true in developing countries today and the way you compensate that is through a tuition subsidy or conditional cash transfer the conditional cash transfer the germ of that idea again in Adam Smith the second poverty enlightenment bang around 1960 decades of the 60s and 70s and I'm pretty convinced there was something really dramatic happened then um but something also not this not well understood and I put this together for this paper I've never done it before basically because it requires heroic assumptions that I could probably not convince most journal editors were believable I've sliced together to the two longest series the two I guess most respected series on on incidents of poverty in the world the Boogingham and Morrison series going back to 1820 using methods that I as a micro economist I go pale when I think about what they did but you know published in the American Economic Review 2002 and a very credible effort what you realize when you go into economic history is you as you're if you're a micro economist you got to just leave a lot of those things behind when you go into the into the history because you just can't apply the same standards of calculation and ferrants because the data is just not there anyway Boogingham Morrison did a heroic effort in their AER 2002 paper and I spliced that together with the the work of Chen and Revellian this is the series from our QGE paper 2010 I put them all together and this is the picture you get something really amazing happened in about 1950 we went on it to entirely different trajectory so that top red line there is the trajectory implied by Boogingham Morrison this is a we've got a mixture of Boogingham Morrison points and Chen and Revellian points post 1950 but look at that there's no doubt that that's a significant change in trajectory 1.5 billion people fewer people one point in other words if the Boogingham Morrison trajectory up to 1950 had continued we would have had an extra 1.5 billion people living below roughly a dollar a day so something dramatic happened there two observations then a turning point in 1950 but also just the simple observation that you saw the picture on poverty attention to poverty is now higher than ever and I've taken that picture back to 1600 right the incidence of the use of the word poverty in the English language and the French language is now at its peak exactly the time when poverty is the lowest it's ever been the peak of incidence and that's not a coincidence that's not a I would argue that's part of the story that I'm going to conclude this paper with when I get there that the there's something very important about the movement between what I close to equilibria the high poverty equilibria with low attention to poverty and the low poverty equilibria with high attention to poverty what was happening in America at this time the rediscovery of poverty in America and really important books I mean Michael Harrington's book which I remember reading back in the university days but I reread really is quite amazing the other America but equally important John Kenneth Galbraith the affluent society I think Harrington's book was really the hugely important one and this was a shock Harrington just described poverty in America in beautiful terms and it wasn't he was drawing on data a bit but primarily he was being a journalist a good social commentator he was looking at what he saw in in in West Virginia or in Louisiana and throughout in Harlem it was and describing it the original print run of this book was 2500 copies they clearly didn't think it was going to be what it turned out to be a huge mass bestseller it got such attention they were within 10 years they were clocking 1.3 million copies so clearly it was a shock and it was really an important contribution in on thinking resurrecting interpersonal comparisons of utility there's this bubbling thing in economics from about the 1818 1930s and a paper about by Lionel Robbins a paper I think is has been misread by many people and but the only history of thought course I ever did was with Lionel Robbins and Adelaide but you know I don't I think there's a lot of we could talk about Robbins on this but the idea people were basically going around particularly in the United States looking for some way of doing talking about policy without making interpersonal comparisons utility and you know this is like weird in a sense because how can you ever talk about distributional policy poverty and inequality without making a personal comparison utility it's like I mean it's just hard to imagine anyway that was finally kind of swept away and arrows and possibility theorem is certainly part of that but many many others including Amartya Sen and others Merley's formulation and the the benefit of hindsight I really realized what an important contribution that paper was the 1978 one paper by Merley's on optimal taxation basically a rigorous formulation of the incentive constraint on redistribution and we didn't have that and now remember the incentives David Ricciardo was talking about how the poor laws which impoverish England the incentive effects were going to be incredible nobody would ever work because of these poor laws somebody took a long time to somebody who formalized this obviously Merley's we're bringing some some fairly heavy mathematics into it but the very idea the essential ideas were things that go way way back in utilitarian thinking John Rawls I think gets probably the credit for the most important single contribution the second poverty enlightenment his theory of justice and again that's something that I reread but I recommend to everybody this was really the first serious effort to articulate a non-utilitarian argument for the role of the state in in distribution the utilitarian arguments were increasingly in this time and before when increasingly seen as inadequate utilitarianism did not penalize poverty per se it didn't penalize inequality of utility per se penalized inequality of incomes given diminishing large utility of income but not inequality of utilities now there were very few efforts to do obvious things like build a utilitarianism with constraints on minimum standard of living nobody was really doing that you had strict utilitarianism and that was it which was utilitarianism was the foundation of the Merley's model for example so we needed that articulation of an alternative to utilitarianism I think to build anti-poverty policy more effectively and in this respect really what John Rawls was doing was giving an interpretation of fraternity remember liberty equality fraternity in the french revolution and the motto of France Rawls was not saying anything fundamentally different on liberty or equality and those are his two of his principles of justice essentially and is exactly what was argued in the declaration of the rights of man he's arguing it may be better and he's arguing in more philosophical terms what's really different is his idea of fraternity and that was the difference principle the idea that we could accept inequality but only if inequality inequality of outcomes we could accept inequality but only if it benefited poor people inequality was just fine as long as poor people benefited no other inequalities were acceptable explosions of attention explosion of attention post 1960 this is just a bunch of ngram viewers very quickly I've got things like the mentions of poverty line mentions of the gini index we've got redistribution we've got anti-poverty policy but they're all telling a very similar picture massive attention in that period up to 1960 new knowledge on poor people efforts in the vital registration systems national sample surveys in india a host of things happening their new analytic tools emerging genitalibrium models are an important contribution social accounting matrices partial equilibrium tools all kinds of ways in which we're linking data to to policy in new and exciting ways of lots are happening there and many people here are pretty aware of this of that there was a backlash of course critics and came various arguments and I'm not going to talk about those and I was slightly about time what was happening in in the developing world this was the second poverty enlightenment was very much both rich world and poor world because what was happening independence movements successful independence movements across the developing world from Africa through to Asia successful ranging from the from Mao's success in 1947 in China independence of india in 1947 through to the independence movements in the 50s and 60s independence through colonial Africa an amazing period of optimism for anti-poverty policy in developing countries but an amazing period of failure a lot of that optimism was well-intentioned the policies were not very successful and took quite a while the enthusiasm for anti-poverty policy in the post-independence period was not matched by by good economics by good arguments about how to do it and a lot of mistakes were made and frustrated plans heavy taxation of agriculture overly ambitious anti-poverty plans biases against trade biases against the tradeable good sector which was the main thing that mattered to poor people all kinds of mistakes being made successes did emerge interestingly I don't think it's clear to me that those big successes in East Asia were because they got all of those policies right that's the curious thing here they were doing making some of those mistakes but not all of them some crucial differences and one crucial differences is one crucial difference is the role of redistribution most of the country a lot of the countries in East Asia had radical redistributive land reforms they had public support for human capital accumulation of poor people a lot of basic policies on the in the distributional and poverty side which actually they got right from in a very early stage the smart propo the smart warrior development plans port for rural non-farm enterprises in some cases like China certainly Vietnam getting the sequencing right between agriculture and non-farm activities enormously important unlike sub-saharan Africa where they've neglected agriculture and persistently they've tried to to run before you can can walk in many of the much of the subcontinent and they're still trying to do that in East Asia they did get the sequencing right they put a lot of emphasis on agrarian reform making sure incentives for sound is support for rural infrastructure and so on some places not as much as others and with some uneven successes but the but the and all of that backed by capable states a rebalancing came in two important dimensions rural development McNamara's Nairobi speech Robert McNamara president of the World Bank at the time was really important in signaling that that rebalancing towards rural development the urban bias arguments Michael Lipton's arguments where I think were hugely important and influential and human development the other rebalancing that occurred the basic needs approach human was important here a lot of you know some excessive institutional product differentiation between some prominent development institutions which were right nameless which I think were wasteful but sort of predictable but underlying it all some really sound arguments I'm Martin you're saying for example criticizing rules for these arguments about primary goods arguing the primary goods were in fact human capabilities there's been a long philosophical debate about opportunities for what when we talk about equal opportunities what are we what is it what is that an opportunity for is it resources is it welfare or is it capabilities new international commitment a host of efforts there the millennium development goals of course and and most recently the new goal of lifting one billion people out of poverty by 2030 and I think that was well-intentioned in many cases but potentially very important also in motivating action the final blow to the idea of poverty I think the idea of the utility of poverty this came very late in the in the story although it had had some some roots all of this you see antecedents and they in the literature and they get ignored or they bubble up I mean everybody knows the general theory probably John Maynard Keynes you probably don't know chapter 24 of the general theory because it's all about distribution and in chapter 24 Keynes just argued there was nonsense to talk about a growth equity trade-off now of course Keynes is thinking about an underemployed economy and then the story can be reversed very easily because poor people tend to consume more so the effective demand constraint could be relaxed more by redistribution toward the poor but still that was completely contrary to economic thinking at the time economic thinking at the time was that the redistribution away from the poor would be good for economic growth because the poor didn't save very much and savings was the constraint it was the rich that saved and that would finance investment costs of inequality in different dimensions including in fully employed economies started to be understood much better in the 1990s borrowing importance of borrowing constraints with asymmetric stemming from asymmetric information basically the idea that who was being locked out of the credit markets because the credit market failure it was poor people though it couldn't they couldn't finance their investments so the more poor people you had the lower the investment the lower the rate of growth lots of other arguments about distortions associated with efforts to redistribute in high inequality countries arguments about inequality and polarization that make reforms more difficult and so on probably then comes to be seen as instrumentally bad this I'd argue was really the turn of the century the idea that poverty was actually an impediment to economic development we weren't just interested in reducing poverty from the point of view of our judgments moral judgments which are hugely important absolutely but we're also interested in reducing poverty from the point of view of sustainability of growth processes going forward and the sustainability of poverty reduction going forward inequalities matter in all kinds of ways to impeding both how much growth reduces poverty and how much growth you get conclusions then we've covered giving you a sketch of a lot of history here and as I say it's a it's like a puzzle I'm still trying to solve but and I'm happy for any help in solving it but we really seen I would argue a radical switch in our models over this 200 years model one poor people I don't have the potential to be anything else but poor don't worry about pro-proportional anti-poverty policies that's a crazy idea of course protection we need that we don't want our workers to be dropping dead so that was all very clear that was model one model two poverty is due to market and a governmental phase promotional policies that make perfect sense as part of development policy I'm not saying model two is universal today but model two is stronger now than ever and I think is going to be dominant today now why do we make that transition how recognizing that transition I've tried to give you the history and tried to explain the steps and what was happening it certainly affirms that progressive change is possible but every one of these steps was the classic two steps forward one step back there was backlash was going on there was reforms it took it took just decades to implement even the most basic ingredients of a set of policies which would help poor people when did the change occur how do we move between these two equilibria the protection only equilibrium of model one where where protection is all we need well obviously that in a sense made a lot of it did make sense in a poverty trap model in the in a time of high poverty when you've got 80 or 90 percent if you recall those booking on Morrison numbers they're estimating 80 percent of the world's population living below a dollar a day in 18 20 you had poverty rates of 50 plus percent by modern standards in western Europe it's not probably that surprising that the arguments for promotional policies were not were not being made very tentatively and had didn't have a whole lot of credibility it was it going to be heavy lifting particularly with those non-convexities particularly with those threshold effects it was going to require huge heavy lifting and it's just nobody was there to to do that getting to the promotion plus protection equilibrium once we had poverty down to a certain level then promotional policies became much more feasible better knowledge helped the political economy could switch then to favor promotional policies the problem is getting from the first equilibrium to the second equilibrium and the real catch 22 here is that poverty itself is part of the reason why you can't get from the first equilibrium to the second equilibrium and that's the catch 22 here poverty impedes overall growth prospects it limits available resources for funding social programs so it becomes self-sustaining and you can you can make that argument even without threshold effects too how did we do it then i've argued in the in the paper and when we bring in the policies and the types of policies essentially there seem to be three three things that that stand out improved technology technical progress has been in the interests of by and large in the interests of poverty reduction improved knowledge technical progress and political voice political voice has played such a role those struggles labor movement particularly in western europe and in england those struggles for basic things like suffrage compulsory schooling with huge resistance and those struggles took decades and decades but those three things i had point to is as important improved knowledge technical progress and political voice i always like to end talks in in a non-english speaking country with thank you very much in that country's language but i haven't persuaded any fins to help me explain how to say finish in finish thank you for your attention