Fox News Story – a clarification

Anyone who has done an interview for television media knows that even though they roll tape and take up your time for up to a half hour, the vast majority of material winds up on the cutting room floor. While I think the points I make in this interview are true, the lead in of the piece is a bit dubious given my conversation with the reporter. The video implies that the success of New Orleans is due in large part because of the large amount of federal funding that came into the area after Katrina. I guess that means we should all be hopeful about stimulus in the wake of crises…
Just to be clear I explicitly told the reporters during my interview that I thought federal and large scale government involvement post-Katrina had done more harm than good. The successful rebuilding and know resilient endurance through the financial crises that New Orleans has experienced is a testament to the power of markets and capitalism.

Understanding Poverty: Social Networks at the Bottom

Caplan’s got an interesting post summarizing Portfolio – a book I haven’t read. Bryan’s most interesting comment about the book:

Yes, the world’s poor are striving to better their lot. But what they really need isn’t small-scale entrepreneurship and micro-credit. It’s employment in the formal sector, and access to international credit markets. What they need, in short, is globalization. Either they need to come to us, or our institutions need to go to them.

In my experience this attention to funneling the bottom classes into the formal sector is explicitly mentioned as a primary goal of microfinance programs, but this leaves a few very important clarifying questions:
1. The typical Austro-Virginian political economy critique: do micro-finance programs have the knowledge or the incentives to accomplish this goal?
2. Do we (economists skeptical of microfinance) or they (microfinance proponents) have a good accounting of the fundamental causes for why these lower class populations are stuck in the illegitimate – dare one say “black market” – sector?
3. Is there a full accounting of all or at least most of the obstacles that may arise with the application of new micro-finance policies?
I share Caplan’s general point mostly because I think the answers to number one aren’t good because most of the support for microfinance programs are coming from the public or quasi public sectors. I think the answer to number two is a mild yes for we but a resounding no for they. And the response to three is dependent on the answers for one and two.