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  1. #1
    not to be trusted miss fortune's Avatar
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    Default Poverty and the Discount Rate

    Poverty culture generally involves an acceptance and embracement of a high discount rate, meaning that now matters more than tommorrow to a greater degree to people who live in real poverty than it does to people who are in a more comfortable economic situation.

    Like the chicken and the egg though, which came first? A high discount rate, which could drive a person from a higher economic class into the lower class, or Poverty in the first place, which forces a person to focus on the day to day practice of living?

    ** Please, no discussions of libretarianism in this thread!
    “Oh, we're always alright. You remember that. We happen to other people.” -Terry Pratchett

  2. #2
    Senior Member Anonymous's Avatar
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    I think that both can probably be the cause. A person can fall into poverty by focusing on day to day living, and then their children, though possibly having a different perspective than their parents, may be forced into that same kind of lifestyle due to their situation.

  3. #3
    Glowy Goopy Goodness The_Liquid_Laser's Avatar
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    For most people poverty came first. One can easily observe people with middle and higher incomes that readily accrue lots of debt (and therefore accept a higher discount rate than the average person). The acceptance of a high discount rate does not necessarily lead one into poverty.

    On the other hand the acceptance of a high discount rate is a survival mechanism for those that are in poverty. Their priority is making through the day or making it through the week or whatever. You can't worry much about the future if you aren't sure where your next meal is coming from.
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  4. #4
    Order Now! pure_mercury's Avatar
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    Quote Originally Posted by whatever View Post
    Poverty culture generally involves an acceptance and embracement of a high discount rate, meaning that now matters more than tommorrow to a greater degree to people who live in real poverty than it does to people who are in a more comfortable economic situation.

    Like the chicken and the egg though, which came first? A high discount rate, which could drive a person from a higher economic class into the lower class, or Poverty in the first place, which forces a person to focus on the day to day practice of living?

    ** Please, no discussions of libretarianism in this thread!
    Poverty existed long before ideas such as a "discount rate" were understood or postulated in a scholarly way. At the same time, rationing food, tools, clothing, etc. existed even before the barter system. It's part of human nature to want something immediately, even when we know it could be more valuable later. That is why interest evolved.
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  5. #5
    Lallygag Moderator Geoff's Avatar
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    It's certainly easier, once you are out of the poverty trap, to stay there.. simply because of the ability of those with money to pay less for the same items than those with barely enough funds to get by.

    Examples :

    With money, can buy weekly, monthly etc tickets for the bus or train.
    Without money, more expensive but can only afford to pay daily.

    With money, can prepay for household fuel, or access cheaper plans.
    Without money, housefold fuels may often be on a more expensive coin operated system (at least, in the UK it is)

    With money, can access cheaper finance (thus reducing interest cost for borrowings)

    With money, can afford to buy items like a cooker outright, and not buy on expensive short term finance.

    (the list is endless)

  6. #6
    & Badger, Ratty and Toad Mole's Avatar
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    Default Usury and Interest

    Quote Originally Posted by pure_mercury View Post
    Poverty existed long before ideas such as a "discount rate" were understood or postulated in a scholarly way. At the same time, rationing food, tools, clothing, etc. existed even before the barter system. It's part of human nature to want something immediately, even when we know it could be more valuable later. That is why interest evolved.
    I must admit I would like to agree with Philadelphia but alas I must be disagreeable once again.

    'Cause before the printing press and universal literacy, there was no interest only usury.

    'Cause usury is intuitive and interest is counter-intuitive.

    'Cause literacy engenders habits of thought, meta-thought, that is counter-intuitive.

    Because who would have guessed that private greed for interest would create public prosperity.

    This thought is entirely counter-intuitive and the result of literacy.

    Whereas, for thousands and thousands of years in the pre-literate world, there was only usury.

    V.

  7. #7
    Per Ardua Metamorphosis's Avatar
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    Quote Originally Posted by whatever View Post
    Poverty culture generally involves an acceptance and embracement of a high discount rate, meaning that now matters more than tommorrow to a greater degree to people who live in real poverty than it does to people who are in a more comfortable economic situation.

    Like the chicken and the egg though, which came first? A high discount rate, which could drive a person from a higher economic class into the lower class, or Poverty in the first place, which forces a person to focus on the day to day practice of living?

    ** Please, no discussions of libretarianism in this thread!
    It seems far more likely that most people begin in poverty and adopt that mentality out of necessity. If someone already had this mentality, it would be virtually impossible to become rich, unless it was somehow given to them, in which case it probably wouldn't last long due to unforseen circumstances/accidents draining their savings.

    I would venture a guess that the percentage of poor people who stay poor is significantly higher than the percentage of rich people who become poor and I think that that mentality has a lot to do with it. Obviously it's not the only cause, but it goes hand in hand with education etc.
    "You will always be fond of me. I represent to you all the sins you never had the courage to commit."

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    than to serve and obey them. - David Hume

  8. #8
    Senior Member cafe's Avatar
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    Some of it is short-term mindset. Some of it is, like Geoff says, being poor is very expensive. There are also plenty of people out there who are willing to exploit the poor because they can.

    Is the mindset the cause or the effect? Having a better mindset does you precious little good if you don't have the resources to make use of it. If you can get a leg up, the better mindset will help you take advantage of it. Very short-term thinking isn't limited to the poor, though, IMO. Witness the CEOs/shareholders who can't be bothered to think about anything beyond the next quarter. They have the means to deflect and/or defer the consequences of their poor choices whereas someone who lives hand to mouth experiences them rapidly and with very little buffer.
    “There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.”
    ~ John Rogers

  9. #9
    Senior Member Lateralus's Avatar
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    It doesn't help that inflation discourages saving.
    "We grow up thinking that beliefs are something to be proud of, but they're really nothing but opinions one refuses to reconsider. Beliefs are easy. The stronger your beliefs are, the less open you are to growth and wisdom, because "strength of belief" is only the intensity with which you resist questioning yourself. As soon as you are proud of a belief, as soon as you think it adds something to who you are, then you've made it a part of your ego."

  10. #10
    Order Now! pure_mercury's Avatar
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    Quote Originally Posted by Lateralus View Post
    It doesn't help that inflation discourages saving.
    Not only that, but inflation that is significantly higher than the growth rate of GDP hurts the working poor the worst. People on marginal incomes quickly end up with submarginal incomes, and are forced to cut down even on what most people would consider "essentials," and may have to look for a second job.
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

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