Paradoxes of the War on Poverty: Warm-Glows and Efficiency

Abstract

The universal moral public good of fighting poverty is provided by both public and private transfers. Efficient public transfers do not crowd out giving because of the particular motives for it. Understanding these effects is necessary for both explaining aid and choosing policy. This analysis reveals puzzling paradoxes, contradictions and impossibilities and the few remaining possible explanations are shown. This investigation includes the various possible types of “warm-glows” (sacrifice or responsibility, praise, altruism-based, shallow, and external), the reasons for implicit cooperation, putative reciprocity and policy incentives. The large number of people concerned eliminates important possibilities (although it favours others).

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