Bob Murphy writes, “Surely to actually “win” the War on Poverty would mean that the government could stop spending money, because every household were self-sufficient. The criterion can’t be, “After you account for how much money we’re still throwing at it, the net result is better.”” and presents this chart:
The poverty rate in the U.S. is measured as pre-tax pre-transfer income (the green line). I’ve always thought that was silly because one’s actual living standard depends only on post-tax post-transfer income. If we care about how actual poor people are living, only the black line in the chart matters.
A “War on Poverty” centered on transfers only makes the green line increase! One of the fundamental principles of economics is that people respond to incentives. If you pay people who don’t work, people will respond by working less. People who work less earn less. Economists call this the…
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Utopia, you are standing in it! 
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