Exploitation & Poverty

Exploitation & Poverty

“Exploitation thrives when it comes to the essentials, like housing and food,” writes Matthew Desmond in his book Evicted. People cannot go without housing, cannot go without food, and cannot go without other basic necessities that can be used against them to extract extra profit by those who control capital, markets, and essential goods. This exploitation is an extra rent (using the Dictionary.com definition of profit or return derived from any differential advantage) that doesn’t mean as much to the person profiting as it does to the individuals and communities burdened by exploitation. But we generally don’t focus on this exploitation.
Desmond also writes, “In fixating almost exclusively on what poor people and their communities lack – good jobs, a strong safety net, role models – we have neglected the critical ways that exploitation contributes to the persistence of poverty.” We are caught up on what ghettos, slums, and worn down neighborhoods lack. We blame individuals for ending up in such poor situations and blame them for being unable to escape, even if we somewhat acknowledge how difficult it could be for anyone to rise up given everything impoverished communities lack. Focusing on what poor people lack brings the scale down to an individual level, highlighting a single case in isolation without consideration of larger structural and systemic forces.
The reality is that poverty doesn’t exist in a vacuum, and neither do any of us. As much as we want to think that poverty is an issue for individuals and defined by what they lack, we all play a part in establishing a society and an economy that can exploit the poor. By neglecting systems of exploitation, we tacitly approve of it, and approve of poverty and everything people in poverty lack. Addressing poverty will mean addressing systems of exploitation, and finding new mechanisms to help people in poverty obtain what they need without being exploited.
Good Intentions, Crushing Workloads

Good Intentions, Crushing Workloads

In the book Evicted Matthew Desmond accompanies a landlord who rents several properties to low-income individuals in Milwaukee to eviction court. People who are being evicted have the option to appear in court to defend themselves from unfair evictions and unfair rental agreements. The problem, however, is that almost no renters ever show up to defend themselves in eviction court. Regarding the problem, he writes:
“Courts have shown little interest in addressing the fact that the majority of tenants facing eviction never show up. If anything, they have come to depend on this because each day brings a pile of eviction cases, and the goal of every person working in housing court, no matter where their sympathies lie, is just to get through the pile because the next day another pile will be there waiting. The principle of due process has been replaced by mere process: pushing cases through.”
It is easy to simply dismiss this issue. It is easy to complain that people being evicted are lazy, irresponsible, and should have to show up if they really care about avoiding eviction. It is easy not to feel sympathy for people who make poor decisions, who may use drugs or be unemployed, and can’t keep up with rent payments when the rest of us have to work hard and go to our jobs in order to buy groceries, pay the rent or mortgage, and keep out of debt.
However, what Desmond notes is that this is an issue of due process, a constitutional provision backed up by two Constitutional Amendments. The right to due process is so important that it is in the Constitution twice, yet it is an afterthought for people facing eviction. There are numerous reasons why tenants don’t show up to represent themselves in eviction court, and some of those reasons are technical in nature, the results of unequal power dynamics, or stem from other addressable aspects of human nature. Whatever the reason, the high rate of no-shows in court demonstrates that due process is not being upheld, that people’s constitutional rights are being violated. None of us would find it acceptable if we had to clear numerous hurdles to be afforded a constitutional right, but that is what we accept with the failures of eviction court. Throughout the book Desmond shows that many people truly do care, but that the crushing workload and a never-ending stream of low-income renters being evicted makes the process overwhelming. As the quote shows, this leads to a prioritization of getting the work done rather than upholding the rights of poor people.
Equal Treatment in an Unequal Society

Equal Treatment in an Unequal Society

Inequalities cannot be solved simply by establishing new standards, criteria, and rules that will apply equally to everyone. When inequality exists, creating new policies and laws designed to be more equitable in how they treat everyone can have the effect of locking in inequality. Such rules can inadvertently give inequality the appearance of fairness and institutional approval.
Matthew Desmond demonstrates how this has happened within housing markets across the country in his book Evicted. For decades, discriminatory housing policy was the norm in our country. At times in our past it has been explicitly authorized in laws and statutes. At other times, it has been openly, yet unofficially, practiced. Today, explicit housing discrimination still exists, but it at least has to be hidden under innocuous motives or carefully crafted lies. Implicit housing discrimination, however, with no one feeling as though they are being discriminatory, is still common and open.
Desmond argues that the history of racial discrimination in housing markets has created a system that perpetuates the inequalities that discrimination deliberately fostered, while appearing race neutral. He writes, “landlords and property management companies … tried to avoid discriminating by setting clear criteria and holding all applicants to the same standards. But equal treatment in an unequal society could still foster inequality.” Applying universal rules in a system that has been shaped and defined by inequalities does not mean that discrimination goes away. It means that it is codified and approved though seemingly eliminated.
When black people have been incarcerated for years following discriminatory and prejudiced practices, they will be overly burdened by legal denials of housing. When housing policies have driven black people toward eviction at disproportionately higher rates than other groups for centuries, then denying someone on the grounds of prior evictions will disproportionately impact black people. The result is that the discriminatory practices that once existed openly and deliberately to harm minority groups for the benefit of the majority will continue, but with the presentation of authority and fairness under the law. This is how ostensibly equal treatment under the law can have such unequal impacts for people in an unequal society.
Cheap Houses, High Rents

Cheap Houses, High Rents

Throughout the book Evicted, Matthew Desmond shows how the market for low-income renters is stacked against them in many ways that are unfair and often exploitative. Without a strong system to ensure that everyone who needs housing is able to access basic and reasonable housing, the bottom of the market for renters becomes a scramble for a small number of dilapidated and overpriced units. Low-income renters cannot walk away from properties that they find unacceptable, because the alternative is reliance on overcrowded and stressed homeless shelters. In the end, this allows landlords to disinvest in their rental properties while maintaining high rental rates.
Desmond writes, “the same thing that made homeownership a bad investment in poor, black neighborhoods – depressed property values – made landlording there a potentially lucrative one. Property values for similar homes were double or triple in white, middle-class sections of the city; but rents in those neighborhoods were not.”
Unfortunately, our nation’s history of redlining and lingering structural racism has created dense minority ghettos in our country. Black people are limited in where they can look for housing, with landlords in white and middle-class parts of cities tacitly refusing to rent to minorities. Desmond shares a story of two black roommates who were showed a rental unit, only to have the landlords suddenly receive a phone call from a tenant accepting a rental agreement, removing the property from the market. In the only instance of the book where Desmond deliberately interfered with the subjects he was studying, he contacted the landlord after he told the black roommates the property was no longer available posing potential renter and was told the property was available [Author note: Desmond is a white male]. Black people are still to this day stuck in areas where local governments and businesses have disinvested, depressing the property values.
As Desmond shows, this creates a situation where landlords can purchase properties cheaply and rent to residents who can’t find housing outside of these disinvested areas. Since black and brown people can’t go elsewhere to find housing, where the rent is equivalent but the properties are nicer, they have to accept high rents for dilapidated units. Poor minority renters are taken advantage of by landlords who purchase cheap houses and charge high rents. This system reinforces structural racism and inequality for the lowest income minority renters in our nation.
Signaling Fairness with Altruistic Punishment

Maintaining the Rules of Fairness with Signaling and Altruistic Punishment

Society is held together by many unspoken rules of fairness, and maintaining rules of fairness is messy but rewarding work. We don’t just advocate for fairness in our own lives, but will go out of our way to call out unfairness when we see it hampering the lives of others. We will protest, march in the streets, and post outraged messages on social media to call out the unfairness we see in the world, even if we are not directly affected by it or even stand to gain by an unfair status quo.

 

Daniel Kahneman, in Thinking Fast and Slow, shares some research studying our efforts to maintain the rules of fairness and why we are so drawn to it. He writes, “Remarkably, altruistic punishment is accompanied by increased activity in the pleasure centers of the brain. It appears that maintaining the social order and the rules of fairness in this fashion is its own reward.”

 

This idea reminds me of Robin Hanson’s book The Elephant in the Brain, where Hanson suggests a staggering amount of human behavior is little more than signaling. Much of what we do is not about the high-minded rational that we attach to our actions. Much of what we do is about something else, and our stated rationales are little more than pretext and excuses. Altruistic punishment, or going out of our way to inflicting some sort of punishment (verbal reprimands, loss of a job, or imprisonment) is not necessarily about the person who was treated unfairly or the person who was being unfair to others. It is quite plausibly more about our own pleasure, and about the maintenance or establishment of a social order that we presumably will benefit from, and about signaling to the rest of society that are someone who believes in the rules and will adhere to strict moral principles.

 

Troublingly, Kahneman continues, “Altruistic punishment could well be the glue that holds societies together. However, our brains are not designed to reward generosity as reliably as they punish meanness. Here again, we find a marked asymmetry between losses and gains.”

 

The second part of Kahneman’s quote is referring to biases in our mental thinking, connecting our meanness or niceness toward others with our tendency toward loss aversion. Losses have a bigger mental impact on us than gains. We might not be consciously aware of this, but our actions – our willingness to inflict losses on others and our reluctance to endow gains on others – seems to reflect this mental bias. We are creating social order by threatening others with loss of social standing at all times, but only with minimal hope of gaining and improving social standing. Going back to the Hansonian framework from earlier, this makes sense. A gain in social status for another person is to some extent a loss to ourselves. Maintaining the social order involves maintaining or improving our relative social position. Tearing someone down signals to our allies that we are a valuable team member fighting on the right side, but lifting someone else up only diminishes our relative standing to them (unless they are the leader who we want to signal our alliance with). Kahneman’s quote, when viewed through Robin Hanson’s perspective, is quite troubling for how our social order is built and maintained.
Markets and Fairness

Markets and Fairness

Research from Daniel Kahneman’s book Thinking Fast and Slow may help explain some of the anger and anti-capitalism sentiment that has cropped up in the United States in the last several years. Senator Bernie Sanders is incredibly popular among a segment of the population and he is not afraid to categorize himself as anti-capitalist and as a socialist to a degree that would have been unthinkable just a decade ago. From my perspective, many people feel that they have been treated unfairly by markets, and this lack of fairness contributes to the Sanders support, especially among young people.

 

Kahneman’s writes, “a basic rule of fairness, we found, is that the exploitation of market power to impose losses on others in unacceptable.”

 

My experience is that people are feeling the forces of market power in many different areas, and becoming discontent with their own economic standing and with feeling as though they are being treated unfairly by large market players. It may be that most people can still afford to buy more than what they need and to live comfortably, but on a daily basis they are faced with a barrage of unfair market practices. There may not be anything legally wrong with a market practice, and the market practice may be adjusting for real value rather than just collecting rents, but nevertheless, the exploitation of market power still feels unfair.

 

I spend a lot of time thinking about healthcare in the United States, and for many years the costs of healthcare and health insurance has risen much quicker than employee wages. With employees feeling their wages stagnate, unfair exploitation of market power can become a major outrage. This has been seen with drug prices as some individuals and companies have specifically targeted pharmaceutical mergers and acquisitions with the intention of increasing drug prices. Some medications have risen dramatically in price at the same time that many deductibles for health plans have shot up beyond the savings levels of most Americans. Even though a drug may provide an incredible value like saving a life or dramatically improving the quality of a life, an increase in price while wages stagnate feels deeply unfair to people. This could be a basis for our discontent with markets and capitalism (at least on the healthcare front), and a source of support for Bernie Sanders and his socialism lean.

 

When I think about it, I see this type of market exploitation beyond the world of healthcare. Ice cream cartons continually get smaller, the fun-sized candy is a depressingly small size now, good quality razors seem to be unreasonably costly with the cheap alternatives being effectively useless. Outside of smartphones, most markets seem to be providing less value for higher costs, and it is not hard to understand the frustrations that so many people may feel with markets and market solutions, even if they can still afford to live a comfortable lifestyle. For any given firm, exploiting market power is a rational and reasonable thing to do, but for customers, this adds up to an untenable sensation of loss, and a deep feeling that markets are unfair and should not be trusted. In a global market sense, it is as if we face a universal tragedy of the commons problem, but instead of a habitable grazeland being decimated, it is our economic wellbeing that is destabilized as each player in the market flexes more market power to impose marginal losses on each consumer.
Transparent Price Bundles

Transparent Price Bundles

One of the items that Dave Chase calls for in his Fair Trade for Health Care Plan in his book The Opioid Crisis Wake-Up Call is bundled prices. He wants pricing to be transparent and up-front so that patients know what services they are receiving, and he wants prices to be bundled for any procedures that we undergo.

 

As chase writes, “Imagine buying a car and getting a bill for the transmission six months later. You’d be livid, yet this sort of thing happens all the time in the healthcare industry.” If you have ever gone to an emergency room or had a surgery, you likely have experienced what Chase is talking about. You were probably billed for the procedure and the doctor who saw you, but then you might receive a separate facility bill some time later, or you might receive a separate bill from the anesthesiologist months after you thought you had finished paying everything from the procedure or emergency room visit that you had.

 

The amount of additional bills that keep rolling in from a single procedure can be frustrating and overwhelming. You likely get an explanation of benefits that to an ordinary person doesn’t explain much of anything, and then you get multiple bills from multiple entities with no clear explanation of why you are receiving another bill. The confusion can easily frustrated patients and prevent them from being able to contest what many see as unreasonable charges.

 

In Chase’s Fair Trade for Health Care, providers would have to be up front about any costs that patients are going to incur before a procedure or encounter. This would include bundling all prices together ahead of time to reduce surprise billing. A patient can try to anticipate charges, but if they can’t anticipate who will be billing them, they cannot truly have a sense of what a procedure will cost them. This is an unfair practice from healthcare providers and drives up costs for everyone.
Pharmacy Benefit Managers

Pharmacy Benefit Managers – Another Shadow Healthcare Actor

Unless you are a health policy person, I’m guessing you have not heard of pharmacy benefit managers, or PBMs. The Commonwealth Fund describes a PBM as “a company that manages prescription drug benefits on behalf of health insurers, Medicare Part D, large employers and other payers … by negotiating with drug manufacturers and pharmacies to control drug spending.” I always thought that pharmacy prices were set directly by my insurance carrier, in contracts that they had worked out somewhere along the line. But it turns out it is more complicated than that, and if you are like me, you will probably understand that PBMs provide some value, but also feel as though they are another actor doing little but driving the cost of healthcare up. For me, it is probably a bit unreasonable, but I hate PBMs.

 

In his book The Opioid Crisis Wake-Up Call, Dave Chase explains how pharmacy benefit managers negotiate rebates with drug companies and insurance carriers for specific drugs. However, the rebates don’t actually get back to the patients. Usually the insurance carrier and PBM are the ones who benefit from the rebate, and specific medications are pushed toward patients so the PBM and insurer can get the rebate. PBMs operate way in the back, and don’t get the same scrutiny as health insurance companies. They are hidden and shielded from risk, which means they have little incentive to put patients first.

 

“PBMs are typically paid by the transaction or employee; it’s not their money, so its not their risk,” writes Chase. “They may strive to handle claims quickly and efficiently, but their defenses against fraud and abuse of prescription drugs are antiquated. The shared responsibilities of the employer or government agency and the PBM create situations in which neither can see the whole picture. Criminals exploit this weakness, leading to a flood of prescription opioids on the street. The American insurance system has allowed this distribution explosion to occur, doing little to nothing to halt its growth.

 

The quote above highlights the misaligned incentives with PBMs, insurers, and governments or employers. PBMs that hide data, favor medications for unclear reasons, and don’t face a lot of direct risk have created lots of problems for the American healthcare system. I opened with a discussion of pricing problems brought on by PBMs, and Chase’s quote shows how they have also contributed to the abuse of prescription opioids. Chase’s book, with examples like the ones laid out in this post, paints a worrying picture of pharmacy benefit managers in the United States. It is partly the complexity they add in the system, and partly the shady behind the scenes deals they are a part of that make me dislike them so much. This type of confusing and apparently unethical role for PBMs is also part of the reason that a lot of people want a universal healthcare system that is able to negotiate drug prices and set specific limits on some costs. It might not save everyone a ton of money in the long run, but it might be more ethical and clarify some of the most confusing parts of the system.

Deceiving Ourselves

Kevin Simler and Robin Hanson write about evolutionary psychology of the brain in their book The Elephant in the Brain to explain why it is that we have hidden motives and why those hidden motives can be so hard to identify. The authors write (brackets mine, italics in original), “The human brain, according to this view [evolutionary psychology], was designed to deceive itself – in [Robert] Trivers’ words, ‘the better to deceive others.'” The authors look at how self-deception can be positive from an evolutionary perspective, and how that shapes the way we think about ourselves and our place in the world.

 

Fudging on the rules from time to time and making ourselves look better than we really are can be good strategies to survive, or at least they potentially were for our ancestors. Humans evolved in small, political, social tribes with rules and norms that were adhered to and enforced to varying degrees. Slight amounts of cheating, if they can go unnoticed, can be beneficial for survival. This drives an evolutionary pressure to pass along selfish genes that favor individual survival, adhere to the rules when it is convenient, but push rules aside when it benefits us. Simler and Hanson argue that this pressure is so strong, that we evolved to not even notice when we bend rules or apply them flexibly in ways that benefit us.

 

We can also seem to justify our actions, a process known as motivational reasoning, which says that we didn’t really do anything bad, we were just making the best decision we could given the circumstances or we were upholding fairness and justice in the absence of a greater authority to administer justice and fairness for us. The more we can convince ourselves that we are right and that we are on the correct side of a moral argument, the more we can convince others that our actions were just. If we are blatantly lying about our motivations, and we know we are lying, it will be harder to convince others and build support around our actions.

 

If however, we convince ourselves that our actions were right and our motives pure, we will have an easier time convincing others of our correctness and of our value to them and to society. When we give to charity, at least part of our donation is probably driven by a desire to want to be seen as the person who gives to charity or as a person with enough money to give some away. These two motivations, however, would be frowned upon. Instead, we convince ourselves that we gave to charity because it is the right thing to do, or because we think the cause is incredibly important. Those both may be true, but if we completely convince ourselves that we are donating for the high minded reasons, we will be more authentic and better able to convince other people that we made donations for high-minded and not selfish reasons. We are wired not to see the world as it is, but to see it through a filter that magnifies our greatness and minimizes our faults, deceiving ourselves so we can do a better job of presenting the best version of ourselves to the world.

The Ego and Fairness

I am constantly interested in discussions, arguments, and complaints about fairness. Dictionary.com defines fair as “free from bias, dishonesty, and injustice” but I think we all know “fair” to be more complex than that definition suggests. What I suspect we often mean when we say fair is equitable, which is a far more complex understanding of the world, events, people, and our interactions with all three. Another quick Google search gives us a definition of equitable as fair and impartial (not much help here), but Deborah Stone in her book Policy Paradox identifies nine different dimensions of equity. Things can be equitable by membership, so  that something is equal among a group, but not necessarily equal between groups. Things can be equitable by rank, where different segments within a group receive different treatment, but within a given segment everyone receives something equally. And things can also be equitable based on how they are distributed, with people all having equal chances of obtaining something or with people having equal opportunities to try to obtain something.

 

What got me thinking again about fairness and equity is a quote from Ryan Holiday in his book Ego is the Enemy. He writes “Ego loves this notion, the idea that something is “fair” or not. Psychologists call it narcissistic injury when we take personally totally indifferent and objective events. We do that when our sense of self is fragile and dependent on life going our way all the time. Whether what you’re going through is your fault or your problem doesn’t matter, because it’s yours to deal with right now.” What I take away from this quote is the idea that (1) we spend a lot of our time and energy trying to figure out if we deserve something or not, (2) we feel personally injured or attacked when something we deem to be unfair happens to us, and (3) we often don’t have much control over whether we receive what we deserve or not.

 

I started with a definition of fairness because I think it is important to get to the root of what we mean when we say something is not fair. We want our life outcomes and the things that happen to us to be commensurate (corresponding in size or degree) with the kind of valuable person we see ourselves to be. We want good things to happen to us and other good people, and we want bad things to happen to bad people as if our lives are constantly judged and adjusted by an independent arbiter weighing our live on a balance.

 

However, I introduced Stone’s perspectives on equity to show that fairness is not a simple black and white consideration. Sometimes, equity depends on your position relative to society and the events within society that impact you. Would it be fair for everyone in your office to get an equal sized slice of cake on your birthday? Should you get the biggest slice because its your birthday? Should your boss get the biggest slice because they are the big kahuna and after all, if they had not hired you then you would not be there celebrating your birthday with everyone? Or should Cheryl get a bigger slice of cake since she was technically the company’s founder years ago, even though now she mostly sits in her office half asleep not really doing much? There are a lot of dimensions of equity and fairness that are hard to sort through, especially when our own self-interest is involved.

 

When we begin to complain that something is not fair, we should take a minute to step back and think about the various dimensions of equity and try to understand what aspects of equality are in play. Rather than focusing on whether we think we have been harmed, we should try to better understand the system within which we operate. Going further, we should recognize that we have little to no control over many of the things that happen in our lives. We cannot control a cancer diagnosis (for the most part), we cannot control whether a texting teen rear ends our car, and we don’t always have as much control over our income as we would like to believe. Sitting and constantly questioning why something happened to us, complaining that things are not fair, and arguing that something more fair should have occurred is useless. Often, there are different aspects of equity at play (if a social decision has lead to the outcome we don’t like) or we are trying to ascribe meaning to a random event over which we had little influence or ability to shape and avoid. We can think of what happened to us rationally, and then move on without having to critique the abstract universal balancer that we would like to have watching over our lives and adjusting our scales accordingly.

 

Remaining focused on whether something is fair and complaining that it is not fair will hold back us and our society. To move forward we must accept that fairness and equity are more complex than they feel in the moment, and we must accept that we have less control in our lives than we often believe. We can do our best with the hand we are dealt, and if we do not think that something is equitable, we can examine the ideas laid out by Stone to advocate for a different dimension of equity. Or if we don’t have any control over the event we can bear our situation nobly and move forward without feeling personally injured.