The only thing that makes sense to me is that people believe that there are psycho-social benefits to work, but poor people are *unaware* of them.
I don't think that makes much sense.
Some folks are pointing out that another possibility is that people are present-biased, and may not be willing to pay the sort term costs of working, even if the long-term benefits are strong.
Saying "incentives matter" doesn't have to imply anything negative about people living in poverty. In general, the idea that people are very sharp and goal-oriented (which is what I generally understand 'incentives matter' to mean) is good.
That said, I think this language is often sort of crudely appropriated and used in a misleading way.
This is particularly the case with discussions of welfare reform, where people use this kind of language to make the exact opposite claim that "incentives matter" should tell us.
A big problem with #2 is that the aggregate data is messy enough that it is easy to paint any picture you want. Was 1990-era increases in labor participation due to:
1- Continued secular trends 2- Welfare reform 3- A hot business cycle 4- EITC expansion
A lot of folks are talking about how the Romney child benefits incentivize having more kids, and I think that that just fundamentally misunderstandings the costs and benefits of being a parent.
Being a parent has a utility-equivalent benefit of something like $1,000,00 a year (SD $100,000) and a cost of something like $900,000 a year (SD $100,000).
The costs AND benefits are just MASSIVE, and I can't see $300/month making a big difference for many people.
A lot of what *looks like* disincentives are often caused by program *phase-outs*, not the programs themselves. I've talked to people who have refused promotions that would mean they lose Medicaid eligibility, for example.
The economics 101 approach has a lot of insight here. People make decisions at the margin, and getting a flat child support payment has at worst a small impact on the decision from that perspective. ideas42.org/wp-content/upl…