Spending and the Poor

Arnold Kling at Econlog is fond of accusing progressives of being too paternalistic to poor people, and believes that poor people can make good decisions ( I don’t feel like finding a link). Basically, Kling is a big proponent of consumer sovereignty, and for the most part I am sympathetic to this view with some exceptions. However, Kristoff’s column throws some doubt on this view,

It’s that if the poorest families spent as much money educating their children as they do on wine, cigarettes and prostitutes, their children’s prospects would be transformed. Much suffering is caused not only by low incomes, but also by shortsighted private spending decisions by heads of households.

Kristoff cites work by Banerjee and Duflo on consumption patterns of the poor,

Two M.I.T. economists, Abhijit Banerjee and Esther Duflo, found that the world’s poor typically spend about 2 percent of their income educating their children, and often larger percentages on alcohol and tobacco: 4 percent in rural Papua New Guinea, 6 percent in Indonesia, 8 percent in Mexico. The indigent also spend significant sums on soft drinks, prostitution and extravagant festivals.

Now, in the paper Kristoff cites, Banerjee and Duflo do explain that education for most of the countries studied is free, which could explain the low education spending. However, it is still surprising to find that poor families spend more on alcohol than education, and is evidence against Klings preferred view of poor people.

I wonder what would happen if suddenly education was not free for the majority of these countries. Would education spending increase and other spending decrease in order to keep kids in school, or would education spending remain the same and kids not go to school?

B&D’s finding that countries where govn’t schools charge fees, education spending is a higher percentage of family income, and Pakistani parents that pay more to put kids in better private schools suggest that spending habits would change. On the other hand, Kristoff’s work in Africa and the specific Congolese village suggest that spending habits would not change.