Financial stress correlated within families

By Razib Khan | January 29, 2010 8:26 pm

Jobless Turn to Family for Help, Often With Complications:

More than half of the respondents to a recent New York Times/CBS News poll of 708 unemployed adults nationwide said they had borrowed money from friends or relatives. In most cases, their financial pictures were bleak. Nearly 80 percent of those who reported borrowing money said their family’s financial situation was “fairly bad” or “very bad,” a significantly greater proportion than among those who had not had to borrow.

The numbers here might exaggerate the effect some, as an individual who is going through financial turmoil may assess the world more darkly than one who isn’t. That being said, it is pretty obvious that income is not randomly distributed across familial networks, and those with resources who are less likely to require aid are actually the ones who will have family in a position to offer it if needful. By contrast, those on the margins are the most likely to have family on the margins.
In pre-modern societies this likely explains how inequality across lineages becomes amplified. Families with more buffer on the margin are less likely to become dispossessed through inclement shocks, and can use their surplus to acquire the property of those lineages which have become impoverished.
This is why economic growth and gains in productivity are essential. In a Malthusian world the way that a high tension state of high inequality eventually “corrected” itself was for massive institutional collapse and general chaos to level the playing field. Of course, the playing field was far more barbarous than it had been previously, so there was probably a trade off between cultural creativity and equality.

CATEGORIZED UNDER: Culture, Economics
  • Mike

    How does “economic growth and gains in productivity” necesarily change the dynamic of certain related groups being less able to deal with cyclic downturns? I missed the part where growth has any relationship to how wealth is distributed.

  • razib

    I missed the part where growth has any relationship to how wealth is distributed.
    in farewell to alms the economic historian greg clark reports that the unskilled workers (the majority) made massive gains in income vis-a-vis the skilled (the minority) between 1800 and 1970 (the starting point varies by when a particular developed nation entered the “industrial revolution”). those gains leveled off around 1970, in the past generation the skilled (those with education) have started to open up the gap again. but it still isn’t what it is pre-1800.
    so in any case, you missed the part where growth had a relation to how wealth is distributed because you didn’t know some basic economic historical facts i guess. since economic growth and gains in productivity have been far greater since 1800 than before, and, many societies (mostly developed) such as france and england were undeniably more equal after rapid economic growth become the norm than before.
    the bigger picture is a shift from zero-sum to non-zero-sum dynamics and outlooks.

  • Mike

    The fact that in certain periods of time in certains areas of the world there is a correlation between growth and income distribution does not mean that it is “essential” and my point was more that even in high growth environments income distribution can and does get worse at times.

  • razib

    do you think egalitarianism is feasible in the long term (e.g., 3 generations of ~ no increase in inequality) in a low-to-zero growth economic environment?

  • russell1200

    In non growth economic systems the Malthusian cycle can be very punishing (eventually) on the wealthy class.
    One possible argument is that the economic growth has extended the cycle further along. But much as the Roman conquests of wealthy adjacent territories helped hold off the day of reckoning for a time, the inevitable fluctuations in technological progress are also likely to bring a day of reckoning at some point.
    The historians who write on this subject seem to go out of their way not to be alarmists, but the obvious (and even many of the subtle) interpretations of their work can be alarming.
    This is a very good (slightly older) book on the subject:
    And this is another author’s website:

  • TGGP

    Aren’t you describing our hunter-gatherer past, Razib?

  • Mike

    I’m not an economist and maybe I was a little flippant in my first response (shades of Laffer curves and rising tides, from my formative years. :) Growth (at least if all costs are properly accounted for) is not what I have a problem with. Maybe what I don’t understand is the cause/effect relationships between inequality and growth. Is it possible that there are positive and negative feedbacks affecting both? Couldn’t the end of slavery positively effect both, active government intervention help/hurt each independently or together depending on the situation (redistribution, ending or enhancing aristocratic prerogative, expanding access to knowledge, expansion of political participation, monetary policy, military investment, corruption, making externalities invisible or visible, protectionist policies based on industrial maturity), entrepreneurship that promotes “better” things versus dishonesty that is profitable in the face of imperfect information?
    It seems to me that this is a complex system, where deriving the appropriate equations is very difficult.


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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at


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