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December 8, 2013 10:49 PM
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Poverty%20Traps.pdf

Decision Intelligence's insight:

I discovered this interesting monograph by Kiminori Matsuyama today, containing a few mathematical models behind the "poverty trap" concept, along with a decent bibliography.

 

Excerpt: "the long run performance depends on the initial condition.

When the economy starts above xc, it will stay above xc and may either grow forever or reach a higher stationary state. However, if it starts below xc, it will be trapped forever below xc. In this sense, both figures exhibit a poverty trap in its strong form. In Figure 2a, the economy caught in the trap will converge to the low-level stationary state. In Figure 2b, it will fluctuate below xc. In both cases, the economy will remain poor only because it is poor. Thus, the poverty becomes its own"

 

In other words, details about the specific state don't matter as much as the macro position in state space.  Translation: more data, more precision, more information is not what helps to solve these kinds of complex problems, but a deep understanding of their dynamics.  The challenge is bringing this level of systems understanding into applied settings.

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