By Anna

welfare_reformTwo things need to happen in the fight against poverty: individuals have to make rational decisions and institutions have to shape human behavior for equal opportunity.  Though to me they are obvious factors that equally contribute to individuals living in poverty, many people blame one or the other, not understanding the particular situations, or why something is a stereotype.

Without boring you all to sleep with economical jargon let me just say that there are two schools of economic thought: one Republicans follow (the neoclassical view), the other Democrats adhere to (the institutional view)-yes, I realize I’m stereotyping, but it’s a stereotype for a reason.

1. Neoclassical: the individual must decide to stay in school and not do drugs because that is the most beneficial to “succeed” in this American society.  Individuals must act in self-interest (not to be confused with selfishness) and use rationality to decide what to do.

For example: For a high schooler in a low-income family this could mean going to school from 8 a.m. – 3 p.m., working from 3:30 p.m. – midnight and then doing homework from midnight – 2 a.m., so there’s not a lot of time to do drugs (or to sleep).  These are the “working poor,” and there is a high probability that they may still need welfare to make ends meet.

2. Institutional: the system evolves with passing policies and shapes human behavior.  The institution can be formal (government laws and regulations) or informal (learned behavior, like giving people personal space).

For example: Traditionally, families could be on welfare from birth to death, but in 1996, welfare was reformed so someone could only be on federal welfare for five years, yet could still qualify for state welfare for a longer period of time.  Because of the institutional set up, it functions as a charity system today and does not act in developing the families to be able to get a higher education so that they have an opportunity to be paid enough to get off of welfare.

Four hundred words barely begin to address the issue of neoclassical and institutional economics.  It has taken hundreds of years for white men to get where they are in the world, and it has only been about 50 years since the United States has started to address its issues of race.  So how can we expect to see equality for all lived out in America for another hundred years?

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