# Is poverty a mathematical necessity?

I recently saw a meme, and the content was something like:

In the near future, a meteor will 'hit' the Earth, and there will be gold rain, and hence everyone will be rich

The ridiculous thing with this is that if everyone has tons of gold, then gold becomes worthless, so in terms of poverty, nothing would change.

This got me thinking!

It is clear that you cannot solve poverty by giving poor people money because than the money would loses its value, and prices go up (since also you would need to print heck a lot of money). However, one thing that might work is if everyone had a job with decent salary. Then, everyone would earn enough money to have decent life.

However, this got me thinking even more!

This solution implicitly assumes that in such a case, everything would be the same except now everyone has enough money to support themselves, but if everyone has a job with a 'decent' salary, say a job with at least paying \$1000 per month, then the values of the money would (or could) drop because everyone has that \$1000, so then \$1000 wouldn't become a 'decent' pay, and not everyone would be able to support themselves with that much money now. (same thing ...) even more! Question: Is not having and poor people mathematically possible ? If you think about it, the very fact that something is valuable, such as gold, depends heavily one the fact that not everyone has that item. Moreover, if all the wealth was distributed equally, and not allowed any imbalances, then we wouldn't be event survive as human species, but any imbalance would results in someone getting richer and some other getting poorer; and this means with some extreme exceptions, the existence of poverty is ensured mathematically. Edit: Guys, you are obscuring the core problem in here by dealing with specific details; forget money, thing in terms of wealth. There is some total wealth in the economy, and assume that there is some poverty threshold of in terms of wealth (it does not matter how this wealth is distributed or kept in practice i.e in terms of some money, gold, or silver; it does not matter.) What is this threshold.? we don't know, and we don't have to know for the time being. The analysis will show in what conditions, such a threshold can exists, and there can be no poor with respect to that threshold (of course, we then have to check, when we interpret our results in terms of real money whether that threshold corresponds to a "decent" one). • What is the reason for the down vote ? – Our Jul 12 '19 at 17:49 • What definition of "poor people" are you using? Your question isn't answerable without knowing that. – 410 gone Jul 14 '19 at 15:08 • @EnergyNumbers See my edit. – Our Jul 15 '19 at 7:57 • Contrary to your edit, the definition you use for poverty does matter. For instance, if we define poverty as meaning having an income (or wealth) less than 1/2 the median then poverty is not a mathematical necessity. Indeed, we could give the same income to everyone and nobody would be poor. If we define poverty as meaning having an income (or wealth) below 4/3 the median then poverty is a mathematical necessity. – Ubiquitous Jul 15 '19 at 10:21 • @Ubiquitous As ı said, the analysis will show us which threshold lead us to the whether poverty is necessary or not, as also you demonstrated, so what you are saying does not contradict with my edit. Also, giving everyone money, as I also pointed out, does not resolve the issue; when everyone has$1000, \$1000 has (more or less) no value in terms of wealth. – Our Jul 15 '19 at 10:39

American economic theorist Henry George wrote about precisely this issue in his famous work Progress and Poverty published in the late 1800s, and based on his observations on the economic development of San Francisco during the gold rush. His argument was that increasing economic development primarily benefitted landowners, at the expense of both capital and labor. (However, since landowners were often also holders of large amounts of capital, it was primarily labor that ended up losing out.) In a nutshell, the leverage that landowners held over the workers allowed them to push wages ever lower, creating poverty as a result of economic progress. He theorized that taxing economic rent (at/near 100%) would eliminate speculation and thus stop the boom/bust cycle endemic to market economies, as well as providing ample revenue to the government to fund social welfare programs and to develop infrastructure.

• Why do landowners want tenants to have low wages? It is not enjoyable to chase after people who don't pay. – H2ONaCl Jul 15 '19 at 4:29
• It’s more that when the economic surplus produced through the combination of all three factors of production (Land, Labor, and Capital) needs to be divided, landowners are able to claim a larger portion. As productivity in a society increases, the landowners (rentiers) take a larger and larger share. This drives wages down to the absolute minimum subsistence level, and would actually reduce the return to capital (i.e. interest) as well, were it not for the fact that in most capitalist economies, the landowners often control much of the capital, as well. – Bill Clark Jul 15 '19 at 5:42
• You seem to be saying, an increase in the non-labor share, all else equal, drives down wages. This seems to be taking what would correctly be viewed as the result as the cause. Cart before horse. I'm not saying Henry George is wrong. I am saying if that is how George explained it then he should have rewritten if he wanted to convince. It makes more sense to look at wages and returns to capital (of which land is one) as the cause. Shares are a direct consequence of secondary importance. – H2ONaCl Jul 15 '19 at 21:11
• Land is not capital. That's the distinction George emphasized, and which neoclassical economics was invented to subvert. If you conflate the two, then it becomes difficult to understand the concept of economic rent (which is in fact the very reason neoclassical economists chose to conflate the two.) Henry George's argument was similar to that of Ricardo, though George's version dug into more detail as to the underlying mechanisms by which wages were driven down. en.wikipedia.org/wiki/Iron_law_of_wages – Bill Clark Jul 15 '19 at 21:15

Onurcanbektas, I really like your thought process. The problem with your mental model is that you've assumed economic output is exogenous. However, in the real world (most) jobs produce economic output. This output then increases the size of the pie, allowing people to be, on average, richer.

However, from a societal perspective, I believe we will always have "poor" people since we essentially define poverty relative to some "median" income. To see this, consider that the richest person 1000 years ago had no running water; something that nearly everyone in the US currently has regardless of whether or not they are "poor". Even in my lifetime, there has been a shift from "feeding the poor" to "feeding the poor with nutritious food". It used to be that the poor were thin, now our concern is they are too fat.

• This answer seems to ignore the premise of the question that allows for redistribution from the rich to the poor. – H2ONaCl Jul 15 '19 at 4:36

In the U.S. the poverty threshold is 3 times the minimum food requirement and it is adjusted for CPI inflation.

The person that determined this threshold was a government economist at the Social Security Administration. That means the poverty threshold is politically determined. Why is it 3 times but not 3.14 or 2.718. The former number was politically acceptable. That means that the resulting level of government generosity was politically acceptable. Since the threshold is politically determined it would require setting the threshold to a very low number to eliminate almost all poverty. This would be politically unacceptable but I sense that consideration might not be relevant to your inquiry. It seems you just want an answer to a logic problem involving math.

If we redistribute within countries but not across borders, there would be a threshold for each country. There are probably countries that do not define a poverty threshold. If a threshold is undefined it is difficult to say if people are in poverty or not.

If all world income were redistributed equally, even across borders, you would still face the problem that the prevalence of poverty depends upon a politically determined threshold.

Implied by the foregoing, there is no empirical fact of poverty until a standard is defined and one example of a standard is an income threshold T. The threshold can be compared to arithmetic mean income I. You have indicated that you believe income is relevant.

The existence of poverty is not mathematically ensured. (The non-existence of poverty is mathematically feasible.) In some circumstances T < I. One circumstance is where political forces set T low enough. This answer is relevant to your inquiry because you posed a question of mathematical possibility.

Another circumstance is where T is left "unchanged" or perhaps changing only by the amount of CPI and CPI calculation is outsourced to a disinterested agent free from political influence. Technology will enable productivity changes over time so that I will increase so that T < I becomes true.

Another circumstance is where T is left "unchanged" or perhaps changing only by the amount of CPI and CPI calculation is outsourced to a disinterested agent free from political influence and I is already higher than T.

I do not agree with your comment about wealth: that when everyone has 1000 dollars the amount has more or less no value. I claim that it has the value that can be purchased with 1000 dollars. I also claim that, after an equalizing global wealth redistribution, wealth still exists and money will still have some purchasing power. I do not even need to have a theory about inflation for my claim to be true. In fact, I made no claim about inflation, other than that it is not infinite inflation. Unfortunately you implied infinite inflation will be a result of equalization.

You made a similar (but less extreme) statement about gold wealth. Since it is less extreme I do not want to address it directly. However, I will say that your statement about the 1000 dollars (of wealth, not income) and your statement about gold wealth, both seem to suggest wealth must diminish when there is equality. Yours is an inflationary theory that I think is wrong. I am not saying that there will not be inflation as a result of redistribution. I am saying there does not necessarily have to be inflation. I am also saying there does not have to be extreme inflation.

The bottom line is that I think you have not justified your claim about the connection between equality (of wealth or of income) and a resulting extreme inflation.

• This does not try to answer to my question. – Our Jul 13 '19 at 22:18
• To quote myself: "Since the threshold is politically determined it would require setting the threshold to a very low number to eliminate almost all poverty." That is the answer. Set the threshold to zero. All poverty will be eliminated by definition. – H2ONaCl Jul 13 '19 at 23:20
• I'm not talking about ending powert by changing the definition of poverty itself; I'm taking about the empirical fact that whether there some poor people or not. – Our Jul 14 '19 at 6:27
• For example, if you are homeless, pulling the powderly line to zero does not make you "barely not poor". – Our Jul 14 '19 at 6:29
• In your question you make it clear that you believe income is relevant. If you believe income to be relevant, a standard would reasonably involve an income threshold. The threshold can be politically determined. The fact that some countries do not have a poverty threshold is proof of that. The fact that inflation statistics can be manipulated is evidence that the poverty threshold can be manipulated. It seems you haven't yet accepted mine as the correct answer so I think I need to elaborate. Please see my addendum for elaboration. – H2ONaCl Jul 15 '19 at 4:13